Porter`s Five Forces Analysis

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Pressure from Substitute Products

Threats from substitute products are low. In particular the unique combination of fully electric high-performance vehicle put Tesla in a favourable position.

Other commercially available fully electric cars such as Ford Focus Electric and the Nissan Leaf lack the performance capabilities of the Model S.

Though, for those wealthy and environmentally concerned people who are sports car lovers Tesla will remain the only option to meet all their needs in one.

Additionally, Ford and Nissan do not give the impression to be highly interested in producing fully electric sports vehicles in the near future but rather continuously concentrate its effort to affordable compact cars.

Unlike Ford and Nissan, Performance vehicle manufacturers such as Daimler-Benz and BMW are developing electric sports vehicles but with the difference that their vehicles exhibit a significantly lower driving radius than Tesla`s base Model S.

Subsequently, it does not appear that Tesla will face much direct competition in the market for fully electric performance vehicles in the near future.

As a matter of fact hybrid vehicles such as the Toyota Prius constitutes imperfect substitutes for pure electric vehicles, meaning Tesla will likely not face much competition from hybrid vehicles.

Nevertheless According to the Department of Transportation, the U.S. total electric vehicle sales increased from 17,000 in 2011 to 96,000 in 2013, and production is continuing to expand whereby further growth is anticipated.

Rivalry Among Existing Firms (Market Competitors)

Tesla position itself in the electrical vehicle market, where due to the small number of competitors the rivalry is modest in comparison to the whole automotive industry.

The company`s major competitors are Nissan Leaf, Ford Focus BEV and Chevrolet Volt.

Even though Tesla is currently the only automobile manufacturer that produces only Electric Vehicle models, the electrical vehicle market became more and more attractive in the last years and is expanding fast.

Subsequently, other automakers are gradually investing R&D on Electric Vehicles to follow this trend and big automobile manufactures, including Audi, Volkswagen and BMW recently entered the market, and introduced their environmental friendly cars, such as small performance turbo diesels, biodiesels cars or hybrids.

In fact, the future will result in an even greater rivalry and the aspect that Tesla is one of the most advanced Manufacturing Companies in the automobile sector won`t stop other more established manufactures from trying to catch up. In addition, a more established company with more financial resources could be in the position to replicate Tesla`s new technology to improve their own business and in the worst case to pass Tesla.

Therefore every company in that industry will need to keep innovative.

In summary, Tesla should attempt to make use of its technical advance, exploit its strengths with regard to future business activities, and beware of potential threats, which result from international competition.

References

Karamitsios, A. (2013). Open Innovation in EVs: A Case Study of Tesla Motors. Sweden.

Mangram, M. (2012). The globalization of tesla motors: a strategic marketing plan analysis.

Motavalli, J. (06. 09 2013). As it increases production, tesla worried about battery supply.

Retrieved from http://wheels.blogs.nytimes.com/2013/09/06/as-it-increases-productiontesla-worries-about-battery supply/?_php=true&_type=blogs&_php=true&_type=blogs&_r=1

Tesla. (2013). Tesla Motors Inc. 2013 Annual Report.