Tesla in the 2020s: moment of truth for the "Master Plan" (Update 2024)
Tesla was founded in 2003 and headed by the controversial Elon Musk. By 2024, the company was witnessing its position as the global leader of the electric car market threatened by the growth of Chinese automakers and their offerings of compact and affordable cars at a time when the European and US markets were showing the first signs of slowdown. In fact, the Chinese carmaker BYD had sold more vehicles than Testa in the last quarter of 2023.
The answer to this was the "New Gen" vehicle, a compact offering that would pioneer several manufacturing techniques to reduce costs, as well as the continued development of full self-driving (FSD), Tesla's autonomous vehicle features. Scheduled to enter production by 2025, the New Gen would. However, Tesla had been struggling, having experienced significant delays and issues relating to the Cybertruck and Semi. Musk himself had declared that Tesla was finding itself in between "two waves of growth." Could the company successfully navigate this transition and replicate the astounding success of its Model 3 and Model Y?
The case presents a panorama of the automotive industry -discussing its main actors, business figures, and business models-before reviewing Tesla's company history. In less than 20 years, Tesla went from selling just a few hundred electric cars-contracting out most of the manufacturing-to shipping nearly two million cars in 2023, with its own manufacturing capabilities in the United States, Europe, and China. The case examines Tesla?s strategy and business model, showcased in Musk's "Master Plan," which he published in 2006 (and revised in 2016 and 2023) and whose goal was to make Tesla the leader in sustainable mobility and energy generation, before presenting the threats faced by the company as it entered the mid-2020s.
What material is included in this case:
Description
Tesla was founded in 2003 and headed by the controversial Elon Musk. By 2024, the company was witnessing its position as the global leader of the electric car market threatened by the growth of Chinese automakers and their offerings of compact and affordable cars at a time when the European and US markets were showing the first signs of slowdown. In fact, the Chinese carmaker BYD had sold more vehicles than Testa in the last quarter of 2023.
The answer to this was the "New Gen" vehicle, a compact offering that would pioneer several manufacturing techniques to reduce costs, as well as the continued development of full self-driving (FSD), Tesla's autonomous vehicle features. Scheduled to enter production by 2025, the New Gen would. However, Tesla had been struggling, having experienced significant delays and issues relating to the Cybertruck and Semi. Musk himself had declared that Tesla was finding itself in between "two waves of growth." Could the company successfully navigate this transition and replicate the astounding success of its Model 3 and Model Y?
The case presents a panorama of the automotive industry -discussing its main actors, business figures, and business models-before reviewing Tesla's company history. In less than 20 years, Tesla went from selling just a few hundred electric cars-contracting out most of the manufacturing-to shipping nearly two million cars in 2023, with its own manufacturing capabilities in the United States, Europe, and China. The case examines Tesla?s strategy and business model, showcased in Musk's "Master Plan," which he published in 2006 (and revised in 2016 and 2023) and whose goal was to make Tesla the leader in sustainable mobility and energy generation, before presenting the threats faced by the company as it entered the mid-2020s.
Learning Objective
The main purpose of this case is to understand the dynamic nature of a firm's strategy and the challenges it faces as it enters a mature industry with an innovative business model. The case also provides an opportunity to discuss the extent to which competitive advantage is sustainable in a context characterized by deep-pocket competitors, high-tech rivals, and firms with important cost advantages.
By the end of the class, students and participants will have:
- Debated the attractiveness of the given industry and identify the drivers that affect willingness to pay and costs.
- Understood the key elements of an entry strategy and what capabilities have made Tesla successful in entering the car manufacturing sector.
- Debated the need to adjust and change a firm's strategy in the face of changes in the external environment.
- Understood the key criteria to evaluate the appropriateness of a firm's strategy, including concepts such as external, internal, and dynamic consistencies.
- Debated the differences between closed and open ecosystems and assessed their pros and cons as alternative business models.
- Debated the relevance of an explicitly stated strategy and the role that a strong leader plays in it.
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