Strategy and Sense Making

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- One of the strategies they are planning to introduce is the concept of self-driven cars or autonomous cars. Tesla calls this as Autopilot. Though still is it’s testing phase, many of its cars are already equipped with the autopilot feature(semi-autonomous), thus enabling its customers to enjoy the experience of self-driven cars which could be our future. It plans to make its cars fully autonomous by 2018.

- Establish the giant 5.5 million square feet Gigafactory in Nevada, which would help the company dramatically cut the cost of its batteries by “using economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating most manufacturing process under one roof.’ (source: 8)

- Tesla aims to dramatically increase how far Tesla’s cars can travel on a single charge. It plans to increase the range of its electric cars to 620 miles(1000 km) per charge by 2019.

- Open more showrooms and manufacturing plants worldwide to mass produce electric vehicles. They also plan on launching 3 new models by 2020.

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Autopilot concept: Self Driven Car by Tesla.(Source: www.tesla.com)

Economic Logic:

Tesla’s income increased by 11%, in the primary quarter of 2016 in contrast with the first quarter of 2015. Tesla has a total revenue of $7Billion, with total assets accounting to $22Billion. The company right now has over 30,000 employees across the world. Although the company has an operating loss of $674.9Million and the the net income has also fallen by $665Million. This loss could possibly be because the company has invested a lot on future models and technologies. Also Tesla Inc. had a profit margin of little over 25% in 2016. The company plans on expanding across rest of world, including India and other parts of Asia by 2020. Tesla motors plan on introducing an SUV later in 2017 at a competing price of $70,000. The company’s biggest success, Tesla Model S, of which it sold roughly around 32,000 units in 2014 (taken from source 4). Apart from electric vehicles, the company is also focusing on Tesla Energy which helps home store the energy so that it can be used for future domestic consumption. Overall, I would say that key to a better future lies in innovation and Tesla is certainly on the right track.

Gandra N V Deepanshu Rao

However, free cash flow-operating cash flow less capital expenditures—is negative for the quarter.

Sources and Reference:

Source 1: https://en.wikipedia.org/wiki/Electric_car_use_by_country

Source 2: https://www.provenmodels.com/598/strategy-diamond/donald-c.-hambrick--james-w.-fredrickson

Source 3: https://www.bloomberg.com/news/articles/2016-05-09/elon-musk-s-tesla-strategy-win-big-by-falling-short

Source 4: https://www.technologyreview.com/s/513151/why-tesla-survived-and-fisker-wont

Source 4: https://www.bloomberg.com/news/articles/2015-03-04/as-tesla-gears-up-for-suv-investors-ask-where-the-profits-are

Source 5: https://www.tesla.com/powerwall

Source 6: https://www.forbes.com/sites/susankalla/2014/11/30/demand-for-tesla-is-not-the-problem-switching-the-world-to-electric-cars-is/#558b89171f85

Source 7: http://sourcesofinsight.com/strategy-diamond/

Source 8: http://www.businessinsider.com/everything-tesla-promises-to-accomplish-by-2020-2016-7/#complete-its-giant-gigafactory-1

Source 9: https://en.wikipedia.org/wiki/Tesla_Powerwall

Source 10: http://www.businessinsider.com/tesla-versus-other-electric-cars-2015-9

Source 11: https://en.wikipedia.org/wiki/Tesla,_Inc.#Partners

Source 12: https://www.tesla.com/autopilot