BE2601 Team Presentation

TESLA MOTORS
Choo Wei Ting | Law Wen Ting | Samantha Hew | Tan Min Er | Yee Shao Xian
ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

About Tesla

“Accelerate the advent of sustainable transport by bringing compelling mass-market electric

cars to market as soon as possible”

●  Powertrain Intellectual Property

●  In-house design & engineering team

●  Innovation
●  Leader in Electric Vehicles market

●  High performance Electric Vehicles

●  Energy storage (Tesla Energy)
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

STRENGTHS WEAKNESS
•  Innovation •  Weak Internal capability
•  Cutting-edge technology •  Production shortfalls
Emphasises on integrating hardware &
software •  Quality control issues
•  Customer-centric Model •  Manufacturing errors & recalls
•  Provides direct after-sales service •  Poor reliability ratings

OPPORTUNITIES THREATS
•  Rising competition
•  Environment sustainability trend •  Incumbent automakers possess
•  Expansion of energy storage stronger expertise and more
product line resources
•  Battery technology provides an •  Slow adoption of EVs
edge •  Challenges Tesla’s expansion &
•  Growing global market for growth
energy storage •  Threatens its sustainability
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

PROBLEM
Overemphasis on innovation and creativity, Overlooked
functionality and execution
Lacks accumulated knowledge
Scale back on its ambitious growth plans
Overly ambitious and idealistic
Focus on mass delivering reliable vehicles
Quality, reliability problem
 ABOUT
ABOUT TESLA
TESLA SWOT
SWOT PROBLEM
PROBLEM CURRENT
CURRENT STRATEGY
STRATEGY RECOMMENDATION
RECOMMENDATION CONCLUSION
CONCLUSION

BUSINESS LEVEL CORPORATE LEVEL OTHERS

Concentric ●  Over-emphasis on
diversification innovation
●  Constant
production delays
●  Partnerships with & low reliability
Shift from Panasonic ratings
differentiation focus to ●  Acquisition with
broad differentiation SolarCity
●  Through price
skimming
●  Target on mass
market
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

STRATEGY
To perfect Tesla’s fundamentals as an auto-car
manufacturer in its auto-assembly and manufacturing
process.
> Regain trust and build brand image

> Satisfy backlogs & inflate demand

Learning economics drive cost down, leading to affordable
> price and capturing of greater market share
Benefits from economies of scale due to
> increase in customer base
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

ACTIONS
Standardization and Standardization of car parts and specialization of
Specialization machines function and workforce to increase SCM
efficiency of production

Create a manufacturing hub near Fremont Factory

Manufacturing Integration
and Gigafactory to lower cost and increase efficiency
SCM
of production

Culture of Collaboration
To facilitate communication between the different HRM
functional teams to produce more desirable products
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

RISK &
MONITORING
Standardization and Negligible Benchmark improvement in
Specialization production time to competitors

Underutilization when Matching the number of suppliers and

Manufacturing Integration increasing demand
demand falls, closure
Overreliance
Internal indices to track progress
Losing innovation as its External indices to identify areas of
Culture of Collaboration competitive edge improvement
Review results via CR reports
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

BAU exponential increase

FINANCIALS 1 due to Gigafactory and

Fremont running at full
capacity

New Action Plans

increased BAU EBITDA by
2 12.79% and 8.88% in
2017 and 2018
respectively

Profits from actions plans

expected to increase
3 exponentially due to
increase in S&S in
factories, larger
manufacturing hub and
more experienced
workers in Tesla
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

CONCLUSION
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Appendix A BAU Financials Projections

BAU (in millions, USD)

Year 2014 2015 2016 2017 2018

Total Revenue
3,198.4 4,046.0 7,050.05 10,243.99 15,696.53

Growth Over Prior Year 58.8% 26.5% 33.23% 45.30% 53.23%

EBITDA
45.2 (294.0) 814.85 1,325.73 2,257.7

Margin % 1.4% (7.3%) 11.56% 12.94% 14.38%

 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Appendix B Action Plans Financials Projections

Action Plan 1: Standardisation & Specialisation (in millions, USD) 2014 2015 2016 2017 2018

Increase in Revenue from standardisation scope of robots - - -

102.4 103.5

Increase in Revenue from hiring specialised employees - - -

102.4 103.5
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Appendix B
Action Plans Financials Projections

Action Plan 2: Integrated Manufacturing (in millions, USD) 2014 2015 2016 2017 2018

Increase in Revenue from benefits of a manufacturing hub - - -

296.0 325.6

Action Plan 3: Culture of Collaboration (in millions, USD)

Increase in Revenue from increased communication amongst employees - - -

9.9 9.9
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Appendix C
Expected Cost Financials Projections

Expected Costs (in millions, USD)

Year 2014 2015 2016 2017 2018

Cost of Standardisation & Specialisation

Cost of adding/production of new robots - - -

121.1 121.1

Cost of hiring new experienced employees - - -

1.1 2.3
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Appendix C
Expected Cost Financials Projections

Cost of Integrated Manufacturing

Cost of facilitating a manufacturing hub - - -

214.9 214.9

Cost of Culture of Collaboration

Cost of HR - - -
4.0 4.0
 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Appendix C
Expected Cost Financials Projections

Total Additional Cost from Action Plans - - - 341.1 342.3

Total Profits from BAU and Action Plans - - - 1,495.33 2,457.9

% growth margin after Action Plans - - - 12.79% 8.88%

 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Assumptions

Revenue

1) All forward period figures are consensus mean estimates provided by the brokers and may not be on a comparable basis as financials.

2) Growth rates for forward periods are calculated against prior period estimates or actual pro forma results taken from Capital IQ

3) Increase in Revenue from standardisation and specialisation included in growth rates due to Tesla consideration of them in the future

3) In 2018, Gigafactory producing at full capacity

4) Revenue of manufacturing hub is assumed to be part of the cost of shipping and logistics, taken 20% if cost of automobile revenues.

5) Revenue of manufacturing hub increase by 10% over year

6) Increased in communication amongst employees would lead to less action class suit cased filed against Tesla which would cost them

$9,936,000, and assumed to be the revenue gained

7) Each sub-part of specialisation and standardisation increase total revenue by 1%

8) Specialisation and standardisation grow by 1% annually

 ABOUT TESLA SWOT PROBLEM CURRENT STRATEGY RECOMMENDATION CONCLUSION

Assumptions

Cost

1) Tesla hired 2 manufacturing VPs as 2 left in 2016, each having estimated salary based on past data of $1,144,845

2) Total cost of new robots is $121082000, calculated by the increase in cost of construction in progress in 2015

3) Cost of new robots are constant and does not increase over the years

4) Total cost of facilitating manufacturing hub and building collaborative spaces is $306,941,000, calculated by the increase in building and

building improvements in 2015, 70% to manufacturing hub, 30% to building collaborative spaces

5) Total cost of facilitating manufacturing hub and building collaborative spaces does not change over the years

6) Implementation of action plans begin only in 2017

7) Cost of HR shifting employees into teams estimated to be 4,000,000