Global Team Assignment (gta)
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PESTEL (1641)PoliticalTesla’s current operating environment in the United States is quite favorable, and has been since the start of the company. Tesla was partially funded through the American Recovery and Reinvestment Act [Placeholder2], as well as the Department of Energies (DOEs) Advanced Technology Vehicle Manufacturing (ATVM) program, which as signed into law by President Bush and later awarded after President Obama took office. The DOE granted a $465 million loan to Tesla in 2009 [Mot14] as part of an $8 billion program funded by the government to help fund advanced vehicle technology. This program in part helped support the engineering and production of the Model S, and the development of powertrain technology that is now Tesla’s core competency and key differentiator from their competition. Tesla paid this loan off nine years early despite media and investor critics, and Tesla was careful to thank all of those who made it possible, including "the Department of Energy and the members of Congress and their staffs that worked hard to create the ATVM program" [RIT13]. Along with the US federal loans utilized for startup and R&D funding, Tesla also relies on support from US politicians through a complex series of federal and state subsidies that incentive consumer purchases and make their vehicles pricing more attractive. For each purchase of a new Tesla acquired for personal use, the federal government offers a $7,500 federal tax credit. In addition, various states offer additional income-tax credits, including $6,000 in Colorado and $7,500 in West Virginia [Koo13]. EnvironmentalTesla Motors believes that electric vehicles lessen dependence on petroleum-based fuels and rely instead on domestically produced electricity, overall boosting the national economy and its independence from foreign oil. Studies estimated that the Tesla Roadster can cost as little as $5 to charge, which totals just $279 in annual fuel costs. This represents an enormous 83% savings compared to the $1625 estimated annual fuel costs for gas-powered vehicles. The Model S maintains multiple battery pack options, and can vary from $5-$15 a day to charge depending upon mileage drives; it’s estimated annual fuel cost is still half the national average. In California and other states, electric vehicles are also eligible to use high-occupancy vehicle (carpool) lanes, which saves drivers time and money by avoiding congested highway lanes and promotes consumer adoption [Placeholder1]. The Tesla Roadster has an efficiency of 88%, compared to 20-25% efficiency for traditional gas-powered vehicles. A higher efficiency means less energy is needed to produce the same propulsion, thus reducing the vehicle’s electricity consumption and associated environmental impacts. Tesla vehicles’ carbon and pollutant emissions will improve as more renewables are integrated into the grid over time. Gas-powered vehicles, on the other hand, use only a nonrenewable source (gasoline) and cannot capitalize on the integration of more renewable energy sources. Tesla vehicles have the capacity to be fueled by electricity from 100% renewable energy such as solar power [Placeholder1]. SocialCEO Elon Musk noted Tesla’s market entry strategy back in 2006, stating “The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model” [Tes14]. Tesla vehicles are still regarded as being for the upper middle class for those who can afford such a forward thinking vehicles premium pricing, however demand is surging for electric vehicles as gas and oil prices continue to rise. There are plans after the Model X to introduce a mid-ranged priced vehicle, codename “Bluestar” that will be in the $30K target price range aimed squarely at the middle class consumer, consistent with Musk’s strategy from 2006 [Tes14]. TechnologicalTesla maintains a significant technological advantage over its current competition market. They posses a market leading power and drive train covered by more than 40 patents with another 200+ pending. This core technology is so advanced, that most of the major competitors have begun seeking partnerships for drive train development in their own brands. Toyota has entered into a $60M dollar agreement for a fully electric RAV4, Daimler as well has invested $50M for a fully electric SMART car for European sales [Tes10]. The fact that they now have contracts to develop propulsion technology for both the largest luxury auto brand in the world (Mercedes), as well as the largest automobile manufacturer in the world (Toyota), speaks a great deal of this small silicone valley firms position in the automobile manufacturer market.  Tesla recognized their need to maintain their competitive advantage in production as well. When making a determination of where to manufacture the Model S, they were looking at several areas and locations of potentially where to build a production facility. But auto manufacturing plants are significantly large investments of sunk capital, and the start-up still needed to determine whether they would receive a return on investments for such a large cash outlay. Enter the New United Motor Manufacturing Inc (NUMMI) factory, a 50% Toyota, 50% GM owned facility that shut its doors after 25 years due to the GM bankruptcy because Toyota did not wish to keep it running alone. Tesla purchased the facility for $59M in total ($42M for factory, $17M for machinery), a fractional price from what it would have taken the company to invest in their own new facility [Bak12]. Tesla now only utilizes a small portion of the facilities capacity, but it now has a state of the art production house with significant room for expansion if and when it needs it, and did so with minimal investment.
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