Marketing Plan

1. Summer 2012
NEW YORK UNIVERSITY STRATEGIC MARKETING PLAN

2. Strategic Marketing Plan
Model S Premium Electric Car, Tesla Motors Inc
August 20, 2012. New York University
Author: Partha Mitra
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3. Revision History
Date Version Description Author
07/07/2012 1.0 Initial Draft – Purpose, company mission, company Partha Mitra
overview, industry analysis, Appendix
14/07/2012 1.1 Added Competitor Analysis, SWOT Analysis, Partha Mitra
References
22/07/2012 1.2 Added Segmentation, Appendix, References Partha Mitra
04/08/2012 1.3 Added Positioning, Product, Price, References Partha Mitra
11/08/2012 1.4 Added Place, Promotion, References Partha Mitra
15/08/2012 1.5 Added Marketing Matrices Partha Mitra
17/08/2012 1.6 Modified each section according to Prof. Gould’s Partha Mitra
comment
19/08/2012 1.7 Added References, images, Cover Page, Partha Mitra
Formatted Table of content, other cosmetic
changes
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4. Table of Contents
1. Purpose of the Document...................................................................................................................... 8
2. Company Mission.................................................................................................................................. 8
3. Company Vision .................................................................................................................................... 8
4. Industry Analysis ................................................................................................................................... 8
4.1 Characteristics of Automotive Industry...................................................................................... 8
4.1.1 Stages of production...................................................................................................... 9
4.1.2 Global production chains ............................................................................................. 10
4.1.3 Ownership pattern ....................................................................................................... 10
4.2 Automotive Industry at a Glance ............................................................................................. 11
4.2.1 Market Size.................................................................................................................. 11
4.2.2 Customers and Target Market..................................................................................... 11
4.3 Electric Vehicle Industry Forecast ........................................................................................... 14
4.3.1 Battery Pack Costs Projections ................................................................................... 16
4.3.2 Charging Infrastructure................................................................................................ 17
4.3.3 Cost of Ownership ....................................................................................................... 17
4.4 Challenges facing the industry ................................................................................................ 17
4.4.1 Component complexity ................................................................................................ 17
4.4.2 Generational research ................................................................................................. 18
4.4.3 Powertrain technology ................................................................................................. 18
5. Competitor Analysis ............................................................................................................................ 18
5.1 Tesla Motor’s competitive Advantages.................................................................................... 18
5.2 Direct Competitor Analysis ...................................................................................................... 18
5.2.1 General Motors ............................................................................................................ 19
5.2.2 Toyota Motors.............................................................................................................. 20
5.2.3 BMW ............................................................................................................................ 21
5.3 Critical Success Factor Matrix ................................................................................................. 22
6. Company and Management Background............................................................................................ 23
6.1 History...................................................................................................................................... 23
6.2 Strategic Partnership ............................................................................................................... 23
6.3 Management............................................................................................................................ 24
7. SWOT Analysis ................................................................................................................................... 24
7.1 SWOT Analysis of Tesla Model S ........................................................................................... 24
7.2 SWOT Analysis of Tesla Model S Manufacturing Model ........................................................ 27
8. Market Segmentation .......................................................................................................................... 28
8.1 Demographics, Psychographics, Technographics Based Research ...................................... 29
8.2 EV Measurement Scales ......................................................................................................... 30
8.2.1 Innovativeness............................................................................................................. 30
8.2.2 Knowledge ................................................................................................................... 31
8.2.3 Environmental Concern ............................................................................................... 32
8.2.4 Relative Advantage ..................................................................................................... 32
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5. 8.2.5 Compatibility ................................................................................................................ 32
8.2.6 Complexity and Perceived risk .................................................................................... 32
8.2.7 Attitude towards Electric Vehicle ................................................................................. 32
8.3 EV Segmentation Research Results ....................................................................................... 33
9. Positioning ........................................................................................................................................... 34
9.1 Positioning Strategy................................................................................................................. 34
10. Marketing Mix .......................................................................................................................... 35
10.1 Product Elements .................................................................................................................... 35
10.1.1 Tangible Product Elements ....................................................................................... 35
10.1.1.1 Dimensions..................................................................................................................... 35
10.1.1.2 Body ............................................................................................................................... 35
10.1.1.3 Additional Dimensions.................................................................................................... 36
10.1.1.4 Powertrain ...................................................................................................................... 37
10.1.1.5 Suspension, Steering, and Brakes................................................................................. 37
10.1.1.6 Charging......................................................................................................................... 37
10.1.1.7 Interior ............................................................................................................................ 37
10.1.1.8 Instrumentation .............................................................................................................. 38
10.1.1.9 Warranty......................................................................................................................... 38
10.1.1.10 Convenience ................................................................................................................. 38
10.1.1.11 Safety ............................................................................................................................ 39
10.1.2 Intangible Product Elements ..................................................................................... 40
10.1.2.1 EV Charger Installation .................................................................................................. 40
10.1.2.2 Instruction....................................................................................................................... 41
10.1.2.3 Product Line Membership .............................................................................................. 42
10.1.3 Brand ......................................................................................................................... 42
10.1.4 Package..................................................................................................................... 44
10.1.5 Warranty .................................................................................................................... 44
10.2 Price Elements......................................................................................................................... 45
10.2.1 Pricing Strategies ...................................................................................................... 45
10.2.1.1 Introductory Price of Model S......................................................................................... 45
10.2.1.2 Federal Tax Credit and allowances ............................................................................... 45
10.2.1.3 Geographic Pricing......................................................................................................... 45
10.2.2 Pricing Objectives ...................................................................................................... 46
10.2.2.1 Sales oriented ................................................................................................................ 46
10.2.2.2 Profit oriented ................................................................................................................. 46
10.2.2.3 Status Quo oriented ....................................................................................................... 46
10.2.2.4 Non-Price oriented ......................................................................................................... 46
10.2.3 Pricing Policies .......................................................................................................... 46
10.2.3.1 One-Price ....................................................................................................................... 46
10.2.3.2 Flexible Price.................................................................................................................. 47
10.2.3.3 Skimming Price .............................................................................................................. 47
10.2.3.4 Penetration Price............................................................................................................ 47
10.2.3.5 Reservation and refundable Policy ................................................................................ 48
10.3 Place Elements........................................................................................................................ 48
10.3.1 Direct Channel System.............................................................................................. 48
10.3.2 Channel System management .................................................................................. 49
10.3.3 Expectations of middlemen ....................................................................................... 49
10.4 Promotion Elements ................................................................................................................ 49
10.4.1 Define challenge type ................................................................................................ 49
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6. 10.4.1.1 Regulatory limitation on internet selling ......................................................................... 49
10.4.1.2 Branding of Tesla Motors ............................................................................................... 49
10.4.1.3 Acquisition ...................................................................................................................... 50
10.4.2 Objectives .................................................................................................................. 50
10.4.3 Promotion Elements .................................................................................................. 50
10.4.3.1 Video Touting ................................................................................................................. 50
10.4.3.2 Mass Selling ................................................................................................................... 51
10.4.3.3 Sales Promotion ............................................................................................................. 51
10.4.4 Strategic direction...................................................................................................... 51
10.4.4.1 Push strategy ................................................................................................................. 51
10.4.4.2 Pull strategy ................................................................................................................... 51
10.4.5 Communication Tools................................................................................................ 52
10.4.6 Media Tools ............................................................................................................... 52
10.4.6.1 Tesla Motors Social Media............................................................................................. 52
11. Marketing Matrices .................................................................................................................. 52
11.1 Profit and Loss Statement ....................................................................................................... 52
11.2 Breakeven Analysis of Model S............................................................................................... 53
11.3 Return of Investment Analysis................................................................................................. 54
11.4 RFM Analysis of Model S ........................................................................................................ 55
11.5 Lifetime Value Analysis ........................................................................................................... 56
11.6 Key Code Analysis .................................................................................................................. 56
12. Appendix.................................................................................................................................. 57
12.1 Market Penetration Forecasts ................................................................................................. 57
12.2 The EV and PHEV Market....................................................................................................... 57
12.3 Fuel/ Energy Costs per Mile of Luxury Sedans vs. Tesla‘s Model S....................................... 58
12.4 Range, Battery Pack Costs, and Price/Mile For EVs .............................................................. 58
12.5 Tesla Strategic Partnership ..................................................................................................... 59
12.6 The attitude towards electric vehicles and its antecedents ..................................................... 59
12.7 Buying intention, attitude, and attitudinal antecedents regarding a state-of-art electric
vehicle 61
12.8 Tesla Store Locations .............................................................................................................. 61
12.9 Tesla Executive Team ............................................................................................................. 62
12.10 Tesla Model S Product Features........................................................................................... 65
12.11 Tesla Enthusiasts .................................................................................................................. 71
12.12 Tesla Motors Social Media Brand Community ...................................................................... 73
13. Reference ................................................................................................................................ 74
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7. Approver / Author / Distribution List
Name Role Approvals
Prof. Myron Gould Professor, Strategic Marketing
Dept. Marketing and Public Relations.
Yes
New York University, NYC, USA.
Partha Mitra Author – Strategic Marketing Plan: Model S
Premium Electric Car, Tesla Motors Inc. N/A
Master of Science, Management & Systems
New York University, NYC, USA.
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8. 1. Purpose of the Document
The purpose of this document is to develop a strategic marketing plan for Tesla Motor’s premium
electric car – Model S. The Model S is a four-door premium sedan electric car with a range of up
to 300 miles on a single charge. Designed from the ground up as a complete electric car, the
Model S combines superior vehicle engineering with Tesla's advanced electric powertrain
technology.
2. Company Mission
Tesla Motors designs and sells high performance, super efficient electric cars. Tesla Motors cars
join style, acceleration, and handling with advanced technologies that make them the quickest
and the most energy-efficient cars on the planet. (Tesla Motors, Mission)
3. Company Vision
At the core of Tesla Motors is the belief that an electric car need not be a driving sacrifice. Tesla
Motors has brought the best of the automotive and technology worlds together to permanently
bury the image of an electric car as a step backwards in performance, efficiency, or design. Tesla
Motor’s key technology is the 100% electric powertrain, which propels us in the present and
simultaneously establishes a foundation for our future models. They set out to forever alter
perceptions of electric vehicles and to make electric cars a viable alternative. Tesla Motor has
produced a car that is at once beautiful and exciting to drive, along with being the most efficient
production automobile on the planet. (Tesla Motors, Vision).
4. Industry Analysis
4.1 Characteristics of Automotive Industry
The automotive industry's complex product development and manufacturing process makes it
one of the most knowledge-intensive industries. There are three distinguishing characteristics of
the automobile sector.
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9. 4.1.1 Stages of production
Production in the automobile sector is characterized by a high degree of segmentation between
different stages in production, often involving different ownership and
Geographical location. There are six different types of production activity within the automobile
sector: assemblers; system suppliers; first, second and third tier suppliers; and aftermarket
product suppliers
 Assemblers: Increasing scale required to spread costs of vehicle design and branding.
Innovation and design capabilities remain critical as first movers in new market sections can
gain important rents while other companies catch up. Some companies, such as Ford, appear
to believe that core competences lie more in branding and finance, and they therefore
outsource parts of manufacturing. Others, such as Toyota, maintain an emphasis on
manufacturing excellence and competence.
 Global mega-suppliers: These firms supply major systems to the assemblers. They are
sometimes referred to as "Tier 0.5" suppliers, because they are closer to the assemblers than
the first-tier suppliers. These companies need to have global coverage in order to
follow their customers to various locations around the world. They need design and
innovation capabilities in order to provide “black-box” solutions for the requirements of their
customers. Black-box solutions are solutions created by the suppliers using their own
technology to meet the performance and interface requirements set by assemblers.
 First-tier suppliers: These are firms which supply direct to the assemblers. Some of these
suppliers have evolved into global mega-suppliers. First-tier suppliers require design and
innovation capabilities, but their global reach may be more limited.
 Second-tier suppliers: These firms will often work on designs provided by assemblers or
global mega-suppliers. They require process-engineering skills in order to meet cost and
flexibility requirements. In addition, the ability to meet quality requirements and obtain
quality certification (ISO9000 and increasingly QS9000) is essential for remaining in the
market. These firms may supply just one market, but there is some evidence of increasing
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10. internationalization.
 Third-tier suppliers: These firms supply basic products. In most cases, only rudimentary
engineering skills are required. A study by Leite (1997) of skills and training at different parts
of the automobile value chain in Brazil showed that in the third-tier of the component chain,
skill levels and investments in training were limited. At this point in the chain, firms compete
predominantly on price.
4.1.2 Global production chains
A distinguishing feature of the automobile sector is the high degree of global integration in
production activities. The value added chain is unbundled at the global level, with different
stages in the production chain located in different countries (Dicken, 2006). With the lowering
of trade barriers and advances in globalization, production location decisions are increasingly
determined by the international competitiveness of production in a particular location, rather
than as was the case historically, by the size and growth potential of the domestic market. As
a result of this vertical disintegration of production across borders, international competitiveness
is determined at the level of different tasks within the automobile sector, rather than at the level of
the industry (Baldwin, 2006; Grossman and Rossi-Hansberg, 2006).
4.1.3 Ownership pattern
The globalization of automobile production has occurred as part of the strategic decision
making processes of the small number of multinationals that dominate the industry. At the
beginning of the decade, the largest 20 firms produced more than 95 per cent of the world’s
vehicles. At present, some 529 plants located in 45 countries are owned by 27 automakers
(Sturgeon and Florida, 2000). As for supplier plant location, 2211 plants located in 60
countries are owned by 150 automobile suppliers. With respect to engine production, 168
plants are located in 24 countries and owned by 16 companies.
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11. 4.2 Automotive Industry at a Glance
4.2.1 Market Size
The automotive industry is involved in the process of designing, manufacturing, and selling motor
vehicles. However, it is not just about selling cars to consumers. The services required to
maintain and distribute cars after the car’s initial sale are part of the automotive aftermarket, a
257 billion dollar market. These services include the car accessories and repairs vital for the
automobile ecosystem to function
4.2.2 Customers and Target Market
The size and importance of the automotive industry have created many opportunities for people
to get involved. According to the Franchise Business Economic Outlook 2011, automotive
franchise establishments are expected to increase 3.9% from the previous year. General
automotive industry trends and an improving economy are revealing opportunities for anyone with
a passion in the auto industry to get involved.
In some parts of the automotive aftermarket industry, there is a significant advantage through
franchising versus starting a shop on your own. In the oil change and lubrication market, the top
few companies reap in a significant amount of the entire industry’s profits. There are also other
opportunities that exist where people can benefit from.
Auto repair will continue to play a big role in the automotive industry. In addition to the routine car
and repairs every car owner must go through, there is going to be higher demand for specialized
parts and repairs required of hybrid and electric cars. Currently, there is a low supply of shops
capable of fixing these hybrid cars despite its increasing demand.
The auto accessories market is a $32 billion dollar market with data showing 92% percent of
consumers are willing to buy auto accessories. With consumers holding their cars longer and
disposable income increasing, auto accessories are beginning to look like a prudent investment
for car owners.
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12. The car rental market, which puts 1.6 million cars on the road, is currently seeing a bounce back
from the damage the financial crisis created. Companies such as Hertz and Enterprise had to
drastically cut costs and keep older vehicles in order to deal with the decreased demand in rental
cars. As the economy improves, these companies are hiring more and switching their old cars for
newer, fewer mileage cars.
The U.S. auto industry sold 1.28 million units in the month of June 2012. This was an increase
of 22.2% from June 2011. The Seasonally Adjusted Annual Rate (SAAR) for the month was 14.1
million. Through six months, industry sales have climbed 14.9% over last year’s first half.
US auto industry is full of competitive auto manufacturing companies, market share of couple of
popular car companies are provided in below pie-chart. BMW Group, Chrysler/Dodge/Jeep, Ford
Motors, General Motors, Honda/Acura, Hyundai/Kia, Mazda, Nissan, Suberu etc are the market
compititors in US Auto market.
Source: www.GoodCarBadCar.net
In the past 10 years, growth in the emerging markets has accounted for most of the increase in
global vehicle sales. Sales in the developed markets of U.S., Europe and Japan declined as
shown in the chart below. However this does not mean emerging market sales will drive
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13. automakers’ earnings higher in the coming years. Countries such as China give preferential
treatment to domestic auto companies, thus adversely affecting western automakers trying to
take advantage of the booming auto market there. In India, domestic automaker Tata (TTM)
makes the $2,000 Nano, beating the competition on price. Ford (F) lags behind other foreign car
companies in capturing a larger share of the Indian market.
Source: JD Power and Bernstein
High oil prices in the mid 1990s caused many consumers to shift away from high fuel dependent
vehicles like SUVs and Hummer’s that the US automakers were producing to lighter and more
compact cars. Sales dropped dramatically as more and more people preferred the smaller and
more fuel efficient Japanese cars to the more high powered American ones. The financial crisis in
2008 made matters worse as car sales further plummeted and the Big Three needed billions of
dollars in government bailout funds.
As of 2010, the automotive market contributed to approximately 4% of the United States’ GDP
and employed millions of workers. Sales have risen 11% since last year and is expected to
maintain stable growth for the next few years.
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14. These recent events have changed the landscape of the automotive market, but they have also
created large amounts of opportunities for aspiring business owners to capitalize on the recent
transformation of the automotive industry.
4.3 Electric Vehicle Industry Forecast
As fuel prices remain high and there is greater concern for the environment, more energy efficient
cars are increasing in demand. Moreover, as part of their bailout specifications, the Big Three
automakers are required to quickly release more energy efficient vehicles to the market. This
increasing popularity for hybrid and electric cars are going to affect the industry in big ways as it
will create a new market for businesses to cater to these new forms of vehicles. Below graph
presents Tesla Electric Car - Model S demand in consumer marketplace.
Global automobile sales forecasts project divergent market penetration rates of approximately 0.6
– 0.9% for plug-in hybrid electric vehicles (PHEVs) by 2015, 9% by 2020, and 22% by 2030 for
Electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEV). Market penetration will
depend on battery pack costs, charging infrastructure, competing technologies, oil prices,
manufacturer investments in EV and PHEVs, and consumer skepticism of EVs and PHEVs.
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15. Market penetration forecast is provided in detail in Appendix 8.1.
Electric Vehicle sales forecast by Type Based on US Sales for 2015.
Source: JD Power and Bernstein
Electric Vehicle Sales Forecast by Volume Range – 2015
EV Sales forecast in US by Type 2015 is provided in the below chat -
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16. To facilitate growth, the U.S. government has invested $5 billion. through the American Recovery
and Reinvestment Act and the DOE‘s Advanced Technology Vehicle Manufacturing (ATVM) Loan
Program. The DOE aims to increase the public accelerated charging stations from 500 to 20,500
in 2012 and reduce battery pack costs by 70% by December 2015.
Two predominant inhibitors of EV/PHEV market penetration are battery pack costs and range
anxiety. Recent reported battery pack costs are as much as 30% lower than 2009/early-2010
projections, potentially reducing the costs of EV/PHEVs. Reduced battery pack costs may enable
EV/PHEV manufacturers to produce vehicles with increased all-electric range, increasing
EV/PHEV market penetration by making EV/PHEV all-electric ranges more competitive with
ranges for internal combustion engine (ICE) vehicles. The EV and PHEV Market in USA is
provided in Appendix 12.2.
The increased capital invested in EV/PHEV technology and infrastructure has made electricity a
more viable alternative fuel for vehicles in the near-term. However, even with the projection that
battery pack costs will decrease rapidly and thereby enable manufacturers to develop EV/PHEVs
with greater all-electric ranges.
4.3.1 Battery Pack Costs Projections
Electric battery manufacturers rarely release exact battery pack costs, but most estimates range
from $500 - $1200/kWh depending on chemistry and cell-form factor.1 However battery pack
costs have decreased faster than expected. In November 2009, Deutsche Bank analysts
projected average battery pack costs reducing from $675/kWh to $500/kWh by 2015 and
$325/kWh by 2020; but in March 2010 it cited industry reports of battery pack bids in the mid-
$400/kWh for 2011/2012. Further evidence is Nissan reporting the battery pack in its economy
EV Leaf costs only $375/kWh. In addition, Tesla CEO Elon Musk stated that the Model S battery
pack will cost less than the Leaf’s pack3, a statement corroborated by calculations of battery pack
costs given information in Tesla’s IPO. In 2008, the United States Advanced Battery Consortium,
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17. an umbrella organization of Chrysler LLC, Ford Motor Company, and General Motors, projected a
reduction in price to $500/kWh by 2012, $300/kWh by 2014, $250/kWh by 2020 and $100/kWh in
an undefined “long-term”. The DOE projects industry-wide battery pack costs to reduce
approximately 70% (likely from an average of $700/kWh or $33,000/pack) by December 2015.
Range, Battery Pack Costs, and Price/Mile For EVs 12.4.
4.3.2 Charging Infrastructure
In addition, the DOE is funding the development of the infrastructure for charging
stations or electric vehicle supply equipment (EVSEs), with the goal of increasing the number of
level 2 (400V) or level 3 (500V) EVSEs, which reduce charge times from approximately from 8 –
16 hours to 30 minutes to 4 hours, from approximately 550 to 20,550 by 2012.7For example,
Telsa’s Quick Charge system is a level 3 charging system that can be installed at home. It can
fully charge a battery in less than 45 minutes. The federal government offers subsidies for
charging stations, covering half the cost of the home charging system.
4.3.3 Cost of Ownership
If battery pack costs reduce as the DOE projects, consumers will have further incentive to
own EVs and PHEVs since costs are $0.02 - $0.04/mile to operate whereas a 25-MPH gasoline
vehicle costs $0.12 - $0.15/mile to operate. In addition, maintenance costs will likely be lower for
EVs and PHEVs. Fuel & Energy cost per mile of Model S is provided in Appendix 12.3.
4.4 Challenges facing the industry
The automotive industry is changing at a rapid pace, particularly in terms of in-car technology and
the impact of next-generation batteries, “green” technologies and component complexity.
Couple of the common issues that automotive industry is currently facing are discussed below.
4.4.1 Component complexity
The modern-day automobile is a highly complex machine with thousands of components all
working in synchronism. The number of feature combinations can be in the thousands. But OEMs
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18. and suppliers need to develop a process that incorporates smart manufacturing and design
decisions while not overcomplicating consumers’ buying options.
4.4.2 Generational research
Consumer needs change as they age and the automobile is one of the most personal buying
decisions they will make. Historically many OEMs have manufactured to a general consumer
audience regardless of age, but that is changing.
4.4.3 Powertrain technology
Governments around the country are placing requirements on original equipment manufacturers
(OEMs) to adhere to strict environmental standards while asking them to produce cars that are
more affordable to drive. Consumers want more fuel efficient vehicles for an affordable price. We
work with clients to determine where the supply of consumer technology meets consumer
demand.
5. Competitor Analysis
5.1 Tesla Motor’s competitive Advantages
A central competitive advantage is the low cost of Tesla’s battery pack, which should allow it to
sell the Model S (2012 launch) at a reasonable price but with a near-normal (up to) 300 mile
range, a combination other EVs have yet to deliver. Tesla Model S battery pack costs will be
at/below ~$300/kWh, well below what we hear from other OEMs/battery makers ($500-600/kWh
for 2011-2012 timeframe, and $375-500/kWh mid-decade target). A key source of Tesla’s cost
advantage is its ability to apply commoditized small cylindrical lithium cells (used in consumer
electronics) to a car via proprietary thermal/power management.
5.2 Direct Competitor Analysis
GM, Toyota Motors, BMW are couple of best known competitors of Tesla Motors. Direct
competitor analysis is provided in below table.
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19. GM = General Motors Company, Pvt1 = Pininfarina S.p.A., TM = Toyota Motor Corporation,
Industry = Auto Manufacturers – Major, 1 = As of 2011
Source: Yahoo Finance.
5.2.1 General Motors
GM represents a significant future threat to Tesla, if, as planned, Tesla decides to
enter the lower end of the market near the $30,000 price point.
 The current development of the Volt, although it is not a true electric car,
indicates that GM remains interested in the electric/hybrid car market, and will
continue to pursue the market in the foreseeable future
 A virtual waiting list surpassed 20,000 as of May 4, 2008, indicating that there
exists a significant market for the Volt.
 Designed for approximately 40 miles of battery powered driving before the 1.0L
turbocharged gas engine automatically begins to recharge the battery, thus
extending the range of the Volt to up to 640 miles of highway driving. This
deviation from a strictly electric car solves the range problem of vehicles run
purely on batteries, but advancements in battery technology could lead to the
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20. removal of this system in the future.
 The engine can be configured to run on gasoline, E85 or biodiesel.
 The E-Flex drive system being designed for the Volt represents an attempt to
standardize many components, which would allow GM to take advantage of large
economies of scale for possible future electric vehicles. In the case of significant
battery technology improvement and increasing demand, GM would be able to
quickly increase its production of electric cars and introduce new models with
significantly less development.
 The Volt, with four passengers seating and a relatively attractive price of
approximately $35,000, appeals to a broad customer base, in contrast to the
current niche market of Tesla.
 If Tesla were to enter the lower end market, it would without doubt face strong
competition from GM. According to Tesla CEO, Elon Musk, The only way for Tesla to
compete effectively would be through differentiation, which would focus mainly on
technology.
5.2.2 Toyota Motors
Tesla Motor’s response to Toyota Motor Company’s longstanding hybrid technology
and possible entry into the plug-in hybrid and fully electric car market:
 Toyota’s Prius first took the road in Japan in 1997, arrived in America in 2000,
making it the most prevalent hybrid car.
 As of September 2007, 430,000 have been sold in the US alone
 Toyota’s hybrid technology has been applied to a wide range of cars, ranging
from the $21,000 Prius to the Lexus flagship LS600h with a starting price of
$104,000.
 The LS600h, which is a large executive luxury car, falls in the same price range
as the Tesla Roadster, though they serve very different purposes.
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21.  The LS600h is meant to be a comfortable luxury sedan and still uses 20 miles per
gallon because the hybrid power train is mated to a 5 liter V8 engine, which is far
from fuel efficient. As a result, the LS600h is targeted at a completely different
market than the Tesla Roadster.
 Tesla should be wary of Toyota offering a larger battery pack and a home
charging station as options for the Prius, as this could eventually lead to Toyota
offering a full electric version of the Prius.
 This would cut into Tesla’s plans to offer fully electric sedans at different price
points, the WhiteStar, priced at around $50,000-$70,000, and a more affordable
BlueStar at around $30,000 down the line.
 At those price points, Toyota can offer a fully electric sedan under Lexus to
compete with the WhiteStar, and another fully electric version of the Toyota
Camry, their bread and butter car for many years, to compete with the BlueStar.
 As a response, Tesla should focus on improving their technological advantage in
fully electric cars so that by the time Toyota enters the electric car market, Tesla
has a technological advantage. (Tesla Motors CTO, JB Straubel)
 Also, Tesla with their first mover advantage should build their brand name to
become as prevalent a name in the electric car market, as Toyota Prius, is in the
hybrid car market.
5.2.3 BMW
Tesla’s one of the potential competitor is BMW, which continues to put effort into
entering the luxury, high-performance, low-emissions, low-consumption auto market.
 Efficient Dynamics
- “Mild hybrid" technology
- Uses many of the energy-saving elements of hybrid technology without
electric motor assist - Small 4-cylinder gas and diesel engines,
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22. Regenerative braking, "Start-stop" system, shuts the engine off when not
needed.
- BMW avoids marketing as "hybrid" since there is no electric motor
- Used on the 1 and 3 series, which are BMW's lower-cost, small
sedans/coupes
- Lower cost, easily integrated into existing cars
 Hydrogen technology
- A dual hydrogen/gasoline powered version of their luxury 7 series sedan
- Only 125 miles on hydrogen, 300 miles on gasoline
- "World's first hydrogen-drive luxury performance automobile"
 Hybrid technology
- BMW demoed an X5 Diesel Hybrid SUV at Geneva Motor Show in 2008
- BMW Vision Efficient Dynamics – A prototype 36 mpg SUV, utilizing a
solar panel roof and hybrid technology
- 5 & 7 series hybrids on the horizon
5.3 Critical Success Factor Matrix
Critical Success Factors Matrix
General Toyota
Critical Success Factors Weight BMW Tesla Motor
Motors Motor
Price 0.10 3 3 3 5
Quality 0.15 2 3 4 5
Customer Service 0.10 3 3 3 2
Branding awareness 0.10 3 5 4 2
Variety 0.10 5 2 2 2
Distribution 0.10 2 3 3 3
Loyalty 0.10 5 2 3 3
Segmentation 0.10 2 3 4 5
Global Expansion 0.05 2 4 3 2
Advertising 0.05 2 4 4 3
Warranty 0.05 2 4 4 5
TOTAL 1.00 2.9 3.15 3.35 3.55
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23. Note: 1 being the worst and 5 being the best.
Based on the above critical success factor matrix we can see Tesla Motor has an opportunity to
improve brand awareness and Global expansion. It will bring total score better couple of years
down the line.
6. Company and Management Background
Tesla Motors, Inc. is a Silicon Valley-based company that designs, manufactures and sells
electric cars and electric vehicle powertrain components. Tesla Motors, founded by Elon Musk,
Marc Tarpenning and Martin Eberhard in 2003, is a company that produces a high-performance
electric car and is backed by a number of high-profile investors.
6.1 History
la was founded in 2003 with the idea that the same lithium-ion technology used in laptops would
be used to create a fully electric vehicle that is not only eco-friendly but also attractive and fun to
drive. The company began raising venture capital in the spring of 2004 and by the end of that
year had designed its first vehicle. Tesla produced the first Roadster in 2008 and has sold
approximately 1,350 of these vehicles as of September 30, 2010. In January 2010, Tesla secured
a long-term Department of Energy (DOE) Loan Facility to finance development of EVs,
powertrains, and manufacturing facilities. The DOE loan facility, along with cash generated from
the IPO has allowed for the continuing development of the Model S, the purchase and retooling of
a manufacturing facility in Fremont, CA, and the expansion of the powertrain facility in Palo Alto,
CA
6.2 Strategic Partnership
In March 2008 Tesla entered into a relationship with Daimler AG to develop battery
packs and chargers for Daimler‘s Smart Fortwo EV program. Subsequently, Tesla entered into an
additional TESLA MOTORS development agreement with Daimler for the Class-A EVs, as well
as agreements with Toyota to develop a powertrain system for an electric RAV4 prototype. Tesla
also maintains a relationship with Panasonic for joint development of battery packs. Panasonic,
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24. Toyota, and Blackstar Investco (an affiliate of Daimler) all have stock ownership in Tesla.
(Appendix 12.5)
6.3 Management
Tesla‘s management team is led by Chairman, Product Architect, and CEO Elon Musk and an
upper management team selected from top automotive and technology firms. Musk is a visible
champion for the company and is almost a symbol of the brand, as well as being a primary
shareholder. Tesla‘s strategic partnerships and their DOE Loan Facility are dependent on Musk
remaining in his role at Tesla and retaining a percentage of ownership in the company until at
least a year after the conclusion of the Model S Facility Project.(Appendix 12.9)
7. SWOT Analysis
7.1 SWOT Analysis of Tesla Model S
Strengths Weaknesses
First-to-market: Tesla’s Roadster was the first Model S will not launch until 2012: There is
federally-compliant highway-capable electric vehicle currently a lot of hype surrounding EVs, and
launched in both the U.S. and Europe, setting Tesla other than Roadster sales and the Model S
up to be known as the electric vehicle company. waiting list, Tesla is unable to turn this hype into
sales. Additionally, the delay of the Model S
allows competitors to launch more affordable
EVs before Tesla.
Partnerships: Tesla’s partnerships with Toyota, Lack of Brand Name Recognition: Compared
Daimler AG, and Panasonic have allowed the to most of its competitors, Tesla is a not a well-
company the opportunity to support their battery known brand in the auto industry. As Tesla
technology research and development. Additionally, attempts to sell EVs to a more mainstream target
Tesla believes that cooperation with other car market, name recognition will become more
manufacturers advances the electric vehicle cause. important.
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25. Focus on design, performance, and efficiency: Consumer behavior changes required for EV
Tesla is the only automaker that places equal purchase: EVs require greater consumer
emphasis on zero emissions and the performance behavior changes than hybrid or plug-in hybrid
and aesthetics of the car. This allows Tesla’s cars to vehicles. For instance, it can take several hours
appeal to a large segment of consumers. to recharge an EV battery, whereas it only takes
a few minutes to fill a car with gas.
Battery Technology: Tesla has superior battery
technology to other manufacturers in the industry.
Opportunities Threats
Sales outside of the U.S., particularly Europe, Continued economic downturn: If the
Asia, and Canada: Tesla has been very successful economy does not improve, Tesla will have
in European markets, particularly Germany, and the difficulty selling the Model S which could severely
company sees great potential in Asian and Canadian impact the success of the entire company.
markets.
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26. Government regulations and economic Delays in the launch of the Model S: Any
incentives: Since 2008, the DOE has invested $5B further delay of the Model S could erode
in EV/PHEV technologies. The DOE objectives consumer confidence and allow more
include reducing battery pack costs 70% by 2015 competitors to enter the market before Tesla.
(this estimate assumes average battery pack cost of
$600 - $700/kWh around 2008/2009), improving the
public charging infrastructure from 550 level 2 or
level 3 charging stations (of which 426 are in
California) to 20,550 nationwide by December 2011,
and reducing the retail price to consumers by offering
a $7,500 subsidy to consumers purchasing EV/PHEV
s. The government intends to accelerate consumer
adoption of EVs/PHEVs by reducing prices and
making owning EVs/PHEVs more convenient to
consumers.
Source: United States Department of Energy.
The Recovery Act: Transforming America’s
Transportation Sector Batteries and Electric
Vehicles. July 14, 2010 TESLA MOTORS 14
The Tesla Brand Community: Tesla has a strong Consumer preference for hybrids and plug-in
and established brand community of owners and hybrids: Tesla only sells electric vehicles. If
hopeful owners who are very enthusiastic about the consumers prefer hybrid technology rather than
brand. Tesla should manage and leverage this EV technology, Tesla is likely to fail.
community to drive sales of the Model S.
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27. Innovative Sales Channel Model: If implemented Termination of strategic partnerships or
properly Tesla’s “Apple store model” will provide a inability to establish new partnerships:
unique Tesla’s R&D has depended on revenue provided
by strategic partnerships. Without this revenue,
Tesla may not be able to fund future R&D.
Source: (Tesla Tomorrow, University of Wisconsin)
7.2 SWOT Analysis of Tesla Model S Manufacturing Model
Tesla Model S SWOT Analysis of Manufacturing Model
Suppliers Production & Information Finance
Manufacturing Management
1.Less reliant on 1.Easy to control Easy access to 1.Cuts the shipping
Strength
the quality reliable inventory, cost of ordering most
performance of and enhance product demand, and components from
suppliers 2.Relatively easy to other around the world
2.Reduces the enlarge manufacturing important 2.Reduce the risk of
cost of capacity by further loss from foreign
information
managing investments currency exchanges
supplier 3.Improve production 3.Will be able to
efficiency by allowing reduce the cost of
relationships
engineers and the Model S when
manufacturing team to reaching economies
work closely of scale
Lose 1.The production of the Merger of two 1.Have to hold more
Weakness
relationships with Model S will be different ERP inventory and
suppliers who dramatically impacted system will require present it on the
may be by NUMMI’s tremendous balance sheet
needed if New manufacturing ability investments of 2.Have to bear more
United Motor 2.May lose capable time, labor and inevitable
Manufacturing, engineers who now are obsolescence of
money
Inc. (NUMMI) working in the Lotus
inventory
capacity can’t facility located in
meet demand
England
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28. Being able to Largely improve quality Largely improve 1.Reduce cost of
Opportunities
focus on and manufacturing inventory Model S
building close management to 2.Make Model S
efficiency
relationship with more
reduce cost
most
price appealing
important
suppliers
Harder to find The loss knowledge 1.Failure to merge Possible tremendous
Threats
capable from talented the two ERP future investments
suppliers when employees who are systems are needed to
facing a working for suppliers - successfully develop NUMMI
shortage of Fail to complete 2.Ability to
facility
internally necessary training for complete
manufactured employees without the ERP merger
delaying the launch of without delaying
components
the launch of the
Model S
Model S
Source: (Tesla Tomorrow, University of Wisconsin)
8. Market Segmentation
The process of marketing segmentation involves the identifying of variations in customer needs
and the determining of how these needs can be fulfilled. Customers may differ in many ways;
wants, purchasing power, geographical location, attitudes, personality, knowledge, benefits
sought, and/or habits. Hence, by identifying specific groups within a market, a market campaign
for a product or service can be more fine-tuned to fit specific segments. Besides usual socio-
demographic variables psycho-graphic and behavioral variables were included to identify specific
market segments.
According to recent research in EV sector below figure it is expected that consumer traits as well
as demographic and background variables might influence the attitude towards an innovation
both directly and indirectly, the indirect effects being mediated through attribute perceptions.
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29. Source: EV Market Segmentation by Anita Garling - Direct and indirect determinants of the
attitude towards electric vehicles
8.1 Demographics, Psychographics, Technographics Based Research
To study perceptions of electric vehicles, and to find volunteers for the experimental
studies, mail-back questionnaires were administered to a random sample of current car owners
in the greater Gothenburg area, Sweden ( Below Table ). Wave 1 was administered in
September 1998 to 300 car-owners and their spouses and wave 2 in December 2008 through
January 1999 to 1,600. A total of 165 fully completed questionnaires were returned in wave 1,
787 in wave 2. The response rate of targeted car-owners was 38.0 % and 34.3 %, respectively.
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30. Source: EV Market Segmentation by Anita Garling.
Separate analyses of variance were performed including the between subject factors age,
marriage, number of children, education, income, number of cars, driving range to work,
driving cost to work, driving range per week, and interest in further participation. The results
indicate that the subjects differed significantly on number of children and on estimated
driving range per week. More subjects in wave 2 had children while subjects in wave 1 estimated
their driving range per week as longer.
8.2 EV Measurement Scales
8.2.1 Innovativeness
GM Goldsmith and Hofacker (1991) define domain specific innovativeness as a trait reflecting
"the tendency to learn about and adopt innovations/new products within a specific domain of
interest." Furthermore, they also thoroughly develop and test an instrument for measuring domain
specific innovativeness and demonstrate empirically that the instrument is adaptable to different
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31. domains (rock music, designer fashions, household electronic product area than others” was
removed from the original instrument and another was added, “Of my acquaintances I am one of
the least interested in TV programs like "Motor Journal" to better go with the domain of
alternative-fuelled vehicles. The instrument was adapted to the domain of "alternative fuels
vehicles" and translated to Swedish (Below Table). A five-point agree disagree scale was used.
Item Innovative Items
No
1 I am among the last in my circle of acquaintances that would use a car fuelled by
an alternative fuel.
2 When I hear about cars fuelled by alternative fuels I become interested in using
one.
3 I would not like to use a car fuelled by alternative fuel.
4 Of my acquaintances I am one of the least interested in TV programs like "Motor
Journal".
5 If a friend of mine has a car fuelled by alternative fuel I am interested in trying it.
6 I am among the last in my circle of acquaintances that would know about new
alternative fuelled cars.
7 I would prefer to use a car fuelled by alternative fuel.
8 I can imagine buying a car fuelled by alternative fuel without test-driving it first.
9 If I should buy a car fuelled by alternative fuel it had to be of a well-known brand.
10 I know the terms of cars fuelled by alternative fuels before others do.
11 I like to drive cars with new and unusual technique.
8.2.2 Knowledge
It has been argued that a consumer’s confidence in own knowledge about a risky new product
may influence the person’s attitude towards the product, its strength, and its ability to influence
behavior. If knowledge has such effects, the practical implications for marketing are important. In
this study knowledge about the state-of the- art in electric vehicles is measured by means of a
battery of five multiple-choice questions allowing calculations of two knowledge measures;
objective knowledge (e.g. number of correct answers reflecting how much a person actually
knows about electric vehicles) and subjective knowledge. The knowledge items were; maximum
speed, driving range, external and internal noise, electro-magnetic radiation, price, fuel costs, and
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32. insurance costs.
8.2.3 Environmental Concern
Environmental concern is in this study defined as a disposition to do the (environmentally) “right
thing” even when it conflicts with one’s own interests. Hence, we follow the tradition of
emphasizing its moral, altruistic nature. In measuring environmental concern the point of
departure is taken in an instrument developed by Biel & Dahlstrand, 1997. A nine-point agree-
disagree scale was used.
8.2.4 Relative Advantage
The relative advantage of the electric vehicles is measured by means of speed, acceleration,
driving range, recharge time, loading capacity, operating costs, price, ease of maintenance, and
environment-friendliness. A nine-point important-unimportant scale was used.
8.2.5 Compatibility
Compatibility with one's lifestyle is measured by means of five items rating describing electric
vehicles’ usability for work trips, shopping, chauffeuring, vacation trips, and irregular short trips
(e.g., to the doctor, to sport). A five-point agree-disagree scale was used.
8.2.6 Complexity and Perceived risk
A number of items were included in the questionnaire in order to measure the perceived
complexity and some aspects of the perceived risk of driving an EV. These items were ease of
maintenance, ease of driving, traffic safety, noise level, risk when recharging, and risk of radiation
from the batteries. Again, a five-point agree-disagree scale was used.
8.2.7 Attitude towards Electric Vehicle
The attitude towards electric vehicles is measured by means of attractiveness, feelings of luxury,
and intention to buy an electric vehicle rather than a conventional vehicle of the same make and
model. Again, a five-point agree-disagree scale was used. In wave 1 buying intention a simple
yes-no scale was used.
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33. 8.3 EV Segmentation Research Results
It is obvious from the presented analyses that not all will respond equally favorably to
attempts to the marketing of an electric vehicle. Presented with the characteristics described in
this study, some consumers respond with a positive attitude towards the electric vehicle and
interest in buying, while others do not. The most likely early adopters of electric vehicles are
those responding most favorably in terms of attitudes and buying intention. Below Table presents
a summary of a cross-tabulation of the responses to the summed attitude items and to the
intention to buy item. As shown, attitude responses can be used to divide the consumers into
groups with widely differing buying intention. Particularly, it shows that among the 16% that hold
the most favorable attitudes towards electric vehicles, 88% express buying intentions, compared
to 58% of the total sample. It seems reasonable to expect that this is the group where the
innovative and early adopters should be recruited.
Source: EV Market Segmentation by Anita Garling.
The ability of consumer traits and perceived product attributes to predict the attitude
towards electric vehicles is analyzed by means of structural equation modeling. Because of
computational problems when the number of items and variables grow big, the full structural
analysis was preceded by exploratory steps checking the ability of groups of demographic and
background characteristics, of consumer traits, and of attribute perception variables to predict the
attitude. Only variables showing a significant path to the attitude in the exploratory steps were
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34. included in the final structural analysis. It is expected that consumer traits as well as demographic
and background variables might influence the attitude towards an innovation both directly and
indirectly, the indirect effects being mediated through attribute perceptions. Since no hypotheses
existed about which traits or background variables would influence which attribute perceptions, all
possibilities have been checked. The ability of demographic and background variables to predict
consumer traits is also included in the structural analysis as is hierarchical relationships among
trait variables (from the point of view of predicting the attitude towards EV’s). However, According
to Anita Garling published in her research report, in order not to clutter the picture and to free
some degrees of freedom in the structural analysis, all non-significant paths have been removed
in the analysis reported in Appendix 12.5. Hence, the table reports the hierarchical structural
model for predicting the attitude towards EV’s that maximizes the dual criteria of fit and
parsimony.
The attitude towards electric vehicles and its antecedents.
9. Positioning
9.1 Positioning Strategy
Knowing details such as demographics, psychographics, and the lifestyles of a brand’s
target market is a huge key to the success of any retail product. These “vital statistics about
populations such as age, sex, and income” can then be placed into segments, which will allow
this automotive business to research is customers and find the best means by which to draw in
their customers (Weitz, 635). Because Tesla’s main product is a sports car, their target market
consist mainly of the male sex. Due to their currently high price point these males must be
businessmen who have yearly disposable incomes of possibly $100,000 and higher. Tesla’s
Roadster is marketed to consumers who enjoy traveling via their vehicles. Its numerous claims of
being an all weather vehicle clearly illustrate this lifestyle of its consumers. The males included in
this target market live stylish lives, are car enthusiast, and follow trends, such as going green.
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35. Tesla’s main form of communications with its consumers is through its extensive website.
Teslamotors.com includes everything from all of Tesla’s vehicle specs to each of its appearances
in the press and magazines. Magazine articles have also been a successful form of
communication globally for Tesla. Many of the surveys showed that Magazine articles were the
most popular way in which consumers have heard of Tesla Motors.
10. Marketing Mix
10.1 Product Elements
10.1.1 Tangible Product Elements
10.1.1.1 Dimensions
 Overall Length: 196.0”
 Weelbase: 116.5”
 Ground Clearance: 6.0”
 Height: 56.5”
 Width (Mirrors Extended): 86.2”
 Width (Mirrors Folded): 77.3”
 Track: 65.4”Front, 66.9 Rear
10.1.1.2 Body
 Lightweight aluminum body reinforced with high strength, boron steel elements
 UV and infrared blocking safety glass windshield
 Rain sensing, adjustable speed windshield wipers
 Frameless, tempered safety glass front windows
 Solar absorbing, laminated safety glass rear window with defroster
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36.  Flush mounted door handles
 Manual folding side mirrors
 19" aluminum alloy wheels with all-season tires (Goodyear Eagle RS-A2
245/45R19). Note: optional 21" wheels come with Continental Extreme Contact DW
245/35R21 high-performance tires
 Aluminum roof
 Halogen headlights with automatic on/off and LED daytime running lights
 Backlit side turn signals, front side marker lights and rear reflex lights
 LED rear taillights and high-mounted LED stop lamp
10.1.1.3 Additional Dimensions
 40, 60, and 85 kWh battery options
 Head room (front/rear): 38.8/35.3"
 Leg room (front/rear): 42.7/35.4"
 Shoulder room (front/rear): 57.7/55.0"
 Hip room (front/rear): 55.0/54.7"
 Seating capacity: 5 adults
 Total cargo volume: 31.6 cu ft
 Rear cargo volume (seats up/down): 26.3/58.1 cu ft
 Frunk cargo volume: 5.3 cu ft
 Turning circle: 37 ft
 Curb weight: 4,647.3 lbs
 Weight distribution (%, front/rear): approx. 48/52
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37. 10.1.1.4 Powertrain
 Model S is a rear wheel drive electric vehicle. The liquid-cooled powertrain includes
the battery, motor, drive inverter, and gear box.
 40 kWh microprocessor controlled, lithium-ion battery
 Three phase, four pole AC induction motor with copper rotor
 Drive inverter with variable frequency drive and regenerative braking system
 Single speed fixed gear with 9.73:1 reduction ratio
10.1.1.5 Suspension, Steering, and Brakes
 Double wishbone, virtual steer axis coil spring front suspension and independent
multi-link coil spring rear suspension
 Variable ratio, speed sensitive, rack and pinion electronic power steering
 Electronic Stability Control
 Traction Control
 Anti-Lock disc brakes (ABS) with ventilated rotors and electronically actuated
parking brake; front: 355 mm x 32 mm; rear: 365 mm x 28 mm
10.1.1.6 Charging
 10 kW capable on-board charger with the following input compatibility: 85-265 V,
45-65 Hz, 1-40 A (Optional 20 kW capable Twin Chargers increases input
compatibility to 80 A)
 Peak charger efficiency of 92%
 10 kW capable Universal Mobile Connector with 110 V, 240 V, and J1772 adapters
10.1.1.7 Interior
 Eight way, power adjustable front seats
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38.  Hand wrapped microfiber and synthetic leather interior surfaces in black
 Piano black décor accents
 Center armrest with two cup holders
 Open center console storage area
 Metal interior door handles
 60/40 split fold-down second row seats
 200 watt, seven speaker stereo system with AM/FM/HD radio. Supports MP3,
AAC, and MP4 music formats. System includes four speakers, two tweeters and one
center channel speaker. Flash memory storage for up to 500 songs.
10.1.1.8 Instrumentation
 17" capacitive touchscreen with media, communication, cabin, and vehicle controls
 Bluetooth wireless technology for hands-free calling and streaming music
 Three spoke, multi-function steering wheel with tactile controls
 Tire pressure monitoring system
10.1.1.9 Warranty
 4 year or 50,000 mile, whichever comes first, new vehicle limited warranty
 40 kWh battery has a 8 year or 100,000 mile, whichever comes first, warranty
10.1.1.10 Convenience
 Keyless entry
 Driver seat detection sensor for start/stop functionality
 Cruise Control
 Standard definition backup camera
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39.  Manual rear liftgate
 Power tilt and telescopic steering column
 Power windows featuring one-touch up and down with resistance reversing to
protect against pinched fingers
 Micro-filter ventilation system with replaceable filters
 Front LED map lights and rear LED reading lights
 Front sun visors
 Fully trimmed frunk and rear cargo area with keyless open
 12 V power outlet
 Automatic climate control with dual zone temperature settings, air distribution
controls and recirculation
 Glove compartment
 Wi-Fi ready
 Dual front USB ports for media and power
10.1.1.11 Safety
 Eight airbags: head, knee and pelvis airbags in the front plus two side curtain
airbags
 Driver and front passenger seat sensors
 Driver seat position sensor
 Three point driver and front passenger safety belts with retractor pretensioners and
secondary lap anchor pretensioners and load limiters
 Three point second row safety belts for all three seats
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40.  Acoustic front row safety belt warning
 Rollover crash sensor
 Crash sensor for high voltage disconnect
 Three second row LATCH attachments for child seat installations (accommodates
three child seats simultaneously: two with LATCH and one with top tether and belt)
 Rear door child safety locks
 Interior, manual release mechanism for all doors, frunk, and rear cargo area
 Anti-theft alarm and immobilizer system
 Horn. Beep. Beep.
Addition Product features with diagrams are mentioned in Appendix 13.9
10.1.2 Intangible Product Elements
10.1.2.1 EV Charger Installation
 Model S plugs into any standard outlet. 240 volt outlets, similar to the ones used to
power a dryer, charge Model S more quickly than a standard 110 volt outlet.
 The Charge Port is hidden in the driver side taillight.
 The cord used to plug Model S into a power source is called a Connector, not a
Charger. The Charger is on-board the car. We may opt for Twin Chargers if we plan
to take a lot of road trips and want to charge as fast as possible.
 Model S can be equipped with a Single Charger (10 kW) or Twin Chargers (20
kW).
 The Mobile Connector comes standard with two outlet adapters: one for a standard
110 volt outlet and one for a 240 volt. We may purchase additional adapters at any
time. If we’re not sure which 240 volt outlet to select, we recommend a NEMA 14-50;
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41. it provides more power than other 240 volt outlets. Model S also comes with a J1772
Adapter for use at public charging stations.
 We recommend outfitting garage with a 240 volt outlet or a High Power Wall
Connector before Model S arrives. We will need the help of an electrician. Download
a summary sheet: 240 Volt Outlet Summary Sheet orHigh Power Wall Connector
Summary Sheet
 Tesla recommends plugging Model S in each night or when convenient to maintain
optimum driving range and battery health. If we go on an extended vacation, plug in
Model S and set it to “Storage Mode” before we leave.
 If we leave Tesla off charge for a significant period of time it will slowly lose its
charge. If left at a 0% state of charge for period of time, we may need a battery
replacement.
 We do not need to run battery to a 0% state of charge to maintain its health. This is
an antiquated practice for a different kind of battery.
 Many utilities offer low rates for off-peak energy usage. If we plan to charge at
night, we recommend speaking with we utility company about options.
 if we’re interested in installing a home solar system to charge Tesla, we
recommend working with a local solar installer to develop and install a system that
supports total daily energy demand. Assume average energy usage per mile is
approximately 300Wh/mile (188Wh/km). Learn more about residential solar
installations from our friends at SolarCity.
10.1.2.2 Instruction
Specification and owners manual of Model S will be available in over
webarchive.teslamotors.com download Brochure section. Hard copy of the brochure
would also be available with the vehicle. Image library and FAQ section also will
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42. include sufficient information about the product specification and instructions. Few
quick facts about the brochure are provided below.
 It will be hardbound and printed on recycled paper.
 It will in be a CDROM to be downloaded on our computers.
 It will be a DVD in which videos explain the operation and functioning of the
model S.
 It can be downloaded as a PDF file from TM's webarchive.teslamotors.com.
 It can be installed on the model S hard-drive. It would be accessible via the
APPS "button" on the infotainment screen.
Source: http://webarchive.teslamotors.com
10.1.2.3 Product Line Membership
Tesla Motors Model S Club is a comprehensive platform that will provide customers
an open forum to address any questions, issues, reviews, news of the product and
also events. It will have FAQ which provides fundamental knowledge about the
product features, information about Grid Capacity, Engine noise, battery life,
replacement cost, performance, range, solar panel and credibility. Product line
membership will help customer to address issues/doubts in Wiki.
Tesla Motor also provides an online membership that can be accessed
webarchive.teslamotors.com. This area is reserved exclusively for Tesla owners and
reservation holders. It's a private place to keep tabs on your car, connect with other
owners, and ultimately manage maintenance. (Tesla Motors,
webarchive.teslamotors.com)
10.1.3 Brand
Tesla Motors has been successfully enhancing its brand positioning with its innovative
approach to vehicle engineering and battery technology, superior aerodynamics, stability and
handling, unique refusal to compromise beauty or efficiency, and sustainability. Tesla has also
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43. been recognized as an innovative, “all-weather super car”, with more than fifteen hundred
Roadsters sold in more than thirty-one countries, making Tesla’s brand an important source of
equity. In Tesla’s case, equity is contributed by the functional features and benefits provided to
the user such as instant torque, superior handling, elite construction, and zero emissions. As an
additional source of equity, its innovative high-voltage car, sleek design, as well as the emotional
benefits, are important attributes of owning and driving a Tesla.
Tesla Motors is on the fourth version of its pioneering Roadster and currently competing with a
host of other EVs brands already being sold in the United States. Nissan LEAF and Chevrolet
VOLT, for example, are offering a much lower price compared to Tesla for its electric cars. Prices
range from $32,700 – $41,000 after the federal EV tax credit. The design and some of the
features such as horsepower and mile range make these automobiles better for commuting than
for road trips.
On the other hand, Tesla Motors refuses to compromise its efficiency and beauty. It offers a sleek
front end, fancy wheels, an elegant interior, incredible range and high performance. Price ranges
from $109,000 - $159,195 after the EV tax credit, depending on the models.
 Originality Innovative, Creative
 Sustainable Environmentally Friendly, Fully Electric
 Efficiency Electric Technology, Energy Efficient
 Personality Cool, Modern, Stylish
 Forward-looking Constantly Evolving
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44. Source: Tesla Motors Positioning: http://issuu.com
10.1.4 Package
Packaging is not applicable for Tesla Model S cars.
10.1.5 Warranty
Model S will come with a 4 year or 50,000 mile, whichever comes first, new vehicle limited
warranty. An additional warranty covers the battery and varies by kilowatt hour capacity. Battery
warranty for 40 kWh will be 8 years or 100,000 miles, for 60 kWh 8 years or 125,000 miles, for 85 kWh/85
kWh performance will be 8 years, unlimited miles.
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45. 10.2 Price Elements
10.2.1 Pricing Strategies
10.2.1.1 Introductory Price of Model S
Tesla Premium EV Car Price
Model S Model S Signature
Model S Model S Signature Signature
Performance Performance
1.40 kWh -
Starting 1. 85 kWh - $84,900 1. 85 kWh - 1. 85 kWh - $97,900
$49,900
Price after $87,900
Includes upgraded
$ 7,500
2. 60 kWh - interior, suspension,
Federal Tax
$59,900 and wheels
Credit
3. 85 kWh -
$69,900
Source: TeslaMotors.com
10.2.1.2 Federal Tax Credit and allowances
Electric vehicles (EVs) purchased in or after 2010 may be eligible for a federal income tax credit of up
to $7,500. The credit amount will vary based on the capacity of the battery used to fuel the vehicle.
(Fuel economy, 2010) To qualify for the US Federal Tax Credit, the new vehicle must be purchased by
the taxpayer, and not purchased for resale. The credit is applied when the taxpayer completes their
annual tax forms. Qualification is contingent on Adjusted Gross Income.
It qualifies to claim a 100% writing down allowance against capital expenditure in year one. Depending
on the tax rate, the corporation can save a minimum of 26% of the total vehicle purchase price
10.2.1.3 Geographic Pricing
Tesla Motors Premium EV Model S is delivered to US and Canada. Pricing of Model S for US
customers are provided in Section 9.1.1. In a blog on the Tesla website, George Blankenship, the
company’s vice president of worldwide sales, wrote: “Due to volatility in currency rates around
the world, we are not able to announce pricing outside the United States at this time. We expect
to announce pricing about six months prior to the start of deliveries in those areas.” (George
Blankenship, VP Tesla Motors, December 20, 2011). Tesla Model S is expected to reach the UK
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46. in right-hand-drive form in mid-2013.
10.2.2 Pricing Objectives
10.2.2.1 Sales oriented
Tesla Motors mostly focus on increasing market share pricing strategy for Model S. Unlike other
car companies Tesla Motors is quite confident about Model S quality and has an objective of
maintaining the present market share or increase its share depending upon its stature. The
pricing goal is to achieve the rapid growth in EV sector and discourage other car companies in
automotive industry to enter the EV market.Tesla Motors will provide base model which is quite
affordable to the middle class within couple of years down the line, this is an objective to be
adopted by Tesla for a transition from other EV sports car to Model S pricing strategy.
10.2.2.2 Profit oriented
In the long run cost of production of Model S will decrease and profits will increase. Tesla Motor’s
long term pricing strategy would be price oriented. Because this strategy helps to achieve a target
return – a specified percentage return on its sales or on its investment. It covers anticipated
operating cost and provides a desired profit. This return Tesla plans to invest in research and
development to come up with a new product line in luxurious EV segment, i.e. Model X.
10.2.2.3 Status Quo oriented
Status Quo oriented pricing strategy is not applicable for Tesla Model S. (LEAF, VOLT, MODEL
S: COMPARISONS AND FINANCIAL VIEWS, 2011)
10.2.2.4 Non-Price oriented
Non-Price oriented pricing strategy is not applicable for Tesla Model S.
10.2.3 Pricing Policies
10.2.3.1 One-Price
At the base price of $49,900 (after US Federal Tax Credit), Model S comes equipped with the 40 kWh
battery, 19" all-season tires, interior surfaces of black textile and synthetic leather, the 17"
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47. touchscreen, a 200-watt, seven-speaker stereo system with AM/FM and HD radio tuners, a Mobile
Connector and J1772 adapter. Base model will be sold over the internet with a one-price strategy
across North America (USA and Canada). (Motors, 2012) In 2012 and 2013 Tesla Motors would be
focusing on USA EV market with a same base price of Model S, mentioned above.
10.2.3.2 Flexible Price
Tesla Model S will be launched with a one price across USA. Tesla is planning to launch same
product in other demographics like Europe or Asia in 2014 and 2015. Flexible Price model would
be followed in other demographics.
10.2.3.3 Skimming Price
Tesla will also follow Price skimming as a pricing strategy in which it will set a relatively high price
for a Model S ‘Performance model’ at first than the base model of Model S, then will lowers the
price over time. The objective of a price skimming strategy is to capture the consumer surplus. If
this is done successfully, then theoretically no customer will pay less for the product than the
maximum they are willing to pay. Tesla Motors will continue to invest in R&D sector to improve
the quality of rechargeable betray technologies and this investment comes from number of high
profile investors and government support. Hence, more improvement they make in terms of
technological innovation and incorporate them in Electric Vehicle like Model S, it will help to lower
introductory base price gradually in consumer market.
10.2.3.4 Penetration Price
Penetration pricing is not applicable for Tesla Model S. This pricing model is applicable when a
company is trying to make profit in the short term, set a low price at the first launch of a product
and continue to increase the price after certain timeline to make more profit. Tesla Motor’s goal is
to get a long term market share and continue to improve quality in EV sector, especially in battery
technology. Hence initial base price of the Model S car will come down gradually, making the
product affordable to consumer space. Penetration pricing strategy will not be applicable for
Model S.
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48. 10.2.3.5 Reservation and refundable Policy
 The reservation payment is 100% refundable.
 Reservation payments vary by country: $5,000USD / $5,000CAD. The reservation payment for
Model S Signature is $40,000USD / $40,000CAD.
 Reservation Holders will be invited to configure their Model S about three months before its
production date.
 Tesla vehicles are designed and built to meet the unique requirements of each market and are
physically different country to country as required by law. Customers should reserve Model S in
the market they intend to register and drive their vehicle. Exporting cars into different markets is
not supported by Tesla Motors.
10.3 Place Elements
10.3.1 Direct Channel System
Unlike other automobile manufacturers, Tesla sells vehicles over the internet and at
Tesla-owned stores in 31 cities worldwide. Tesla plans to have a total of 50 stores, opening the
additional stores to coincide with the Model S rollout. (Appendix 13.7) In 2010, Tesla hired
George Blankenship, formerly of Apple, as its vice president of design and store development.
"This is about technology, innovation, and a great pipeline of products that need to be explained
to the customer" he told Fastcompany.com.47 Blankenship‘s strategy is to put Tesla showrooms
in the middle of popular retail districts, mimicking the strategy of high-tech companies like Apple,
and completely revolutionizing the typical dealership model. This retail model will allow Tesla to
control the customer experience in each of its stores, providing the necessary customer service
for a high involvement purchase such as an EV. TESLA MOTORS 11 Furthermore, the in-store
experience can confirm the emotional appeal of a Tesla vehicle, making customers already feel
part of a cool, hip, and exclusive brand community. However, this unproven model is not risk
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