Description 1. How was Tesla able to enter the mass-market American automotive sector? Describe the ...
Description 1. How was Tesla able to enter the mass-market American automotive sector? Describe the business model of Tesla Inc. How is Tesla’s business model different from traditional car manufacturers? 2. At which stage of the automotive industry life cycle is the electric vehicle industry? What core competencies are the most important at this stage of the industry life cycle? Tie your explanation to Tesla’s Master Plan 1. 3. Evaluate Elon Musk’s Master Plan 2 and Plan 3. How realistic and achievable is the goal of producing 20 million EVs by 2030? Why, or why not? 4. What is Tesla’s corporate Strategy? Do you believe it can be a source of a sustainable competitive advantage? Why, or why not? UNFORMATTED ATTACHMENT PREVIEW For the exclusive use of J. Ye, 2023. MHE-FTR-077-1264124317 APRIL 6, 2023 FRANK T. ROTHAERMEL Tesla, Inc. The desire for people to want a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla, not ‘do they want a Tesla.’ —Elon Musk, Founder, CEO, and Technoking of Tesla1 March 2, 2023. Elon Musk was scrolling through his Twitter feed as the Cybertruck with black armored windows approached the runway near Giga Texas. Musk thought the Investor Day held the previous evening went well as he and more than a dozen of his colleagues unveiled Tesla’s Master Plan 3. Musk was on his way to Monterrey, Mexico, to survey the area where Tesla would build its next Gigafactory, announced just a day earlier. As the Gulfstream G700 gained altitude, Musk started to check the stock markets and was surprised that investors were not impressed with Master Plan 3 as Tesla’s stock dropped by 6%. Tesla, Inc. is a vertically-integrated clean technology company that designs, develops, manufactures, and sells high-performance fully electric vehicles (EVs) and energy generation and storage systems. In 2022, Tesla had sales of $81 billion and generated over $12 billion in net income (Exhibit 1). Tesla’s stock market valuation peaked at over $1.2 trillion in early 2022. Only five other tech companies—Alphabet, Amazon, Apple, Meta (formerly Facebook), and Microsoft—had previously crossed the one-trillion valuation threshold.2 By spring 2023, Tesla’s market cap had fallen by more than 50% to below $600 billion. Yet, Tesla was still more valuable than the five largest car manufacturers by volume combined (Toyota, Volkswagen [VW], GM, Ford, and Stellantis [formerly Fiat Chrysler]). Although the five legacy carmakers produced together 28 times as many vehicles (36 million) in 2022 as Tesla (1.3 million), their combined market cap stood at $429 billion, 26% lower than Tesla’s. Elon Musk: Engineer Entrepreneur Extraordinaire Musk describes himself as “an engineer and entrepreneur who builds and operates companies to solve environmental, social and economic challenges.”3 Elon Musk is motivated by cracking some of humanity’s most challenging problems, such as addressing climate change, achieving multiplanetarity by establishing a self-sustaining colony on Mars, enhancing human capabilities with artificial intelligence (AI) and brain-computer interfaces, and solving traffic congestion.4 Professor Frank T. Rothaermel prepared this case based on public sources; it is not any endorsement, source of data, or depiction of effective or ineffective management. All opinions expressed and all errors and omissions are entirely the author’s. © by Rothaermel, 2023. All rights reserved. This document is authorized for use only by Jiting Ye in AD715 AY 2023 - 2024 taught by VLADIMIR ZLATEV, Boston University from Aug 2023 to Feb 2024. For the exclusive use of J. Ye, 2023. The problems Musk focuses on are hard because they require massive investments over long periods to achieve the necessary vast scale without guaranteeing success. Once Musk hones in on a problem he wants to solve, he creates an organization and assembles the required resources. Addressing these thorny issues requires Musk to take “big bets,” repeatedly putting all his wealth on the line. Nonetheless, as of spring 2023, Elon Musk is the world’s richest person, with an estimated net worth of $200 billion. Musk has a larger-than-life profile and has been described as “Henry Ford and Robert Oppenheimer in one person”5 and “Tony Stark, the eccentric inventor better known as Iron Man.”6 The actor Robert Downey Jr. modeled his role as Tony Stark in the Iron Man movie after Elon Musk, who appeared in the Iron Man 2 movie. In line with his movie avatar, Elon Musk declared, “I would like to die on Mars. Just not on impact.”7 EARLY LIFE AND EDUCATION Elon Musk was born in 1971 in Pretoria, South Africa. At 17, Musk emigrated to Canada to avoid being conscripted into the army. Says Musk, “I don’t have an issue with serving in the military per se but serving in the South African army suppressing Black people just didn’t seem like a really good way to spend time.”8 Musk enrolled at Queen’s University in 1990. After receiving a scholarship, he transferred to the University of Pennsylvania. He graduated in 1995 with bachelor’s degrees in economics and physics, and he then moved to California to pursue a Ph.D. in applied physics and material sciences at Stanford University.9 ZIP2 Musk quit graduate school after only two days to start Zip2, an online provider of business directories and maps. Four years later, in 1999, computer-maker Compaq acquired Zip2 for $341 million (and was, in turn, acquired by HP in 2002). Still in his twenties, Musk had become a dot.com multi-millionaire. As a treat, he purchased a McLaren F1, a limited-edition supercar, of which only 106 units were produced with 64 of them road-legal cars, for around $1 million. Musk later totaled the McLaren F1 while demoing the car’s speed, with Peter Thiel, a serial entrepreneur and venture capitalist, in the passenger seat. X.COM, CONFINITY, AND PAYPAL After the sales of Zip2, Musk did not rest on his laurels. In 1999, Musk founded X.com, an online payment company that merged with Confinity, started by by Peter Thiel, Max Levchin, and Luke Nosek, to create PayPal. In 2002, eBay acquired PayPal for $1.5 billion, netting Musk an estimated $160 million. SPACEX With the wealth from the PayPal acquisition, Musk could focus on his passion of exploring space with the goal of making humans a multiplanetary species to avoid extinction. In 2002, he founded Space Exploration Technologies Corp., or SpaceX. To make colonization of Mars feasible, Musk needed to develop low-cost, high-powered, reusable rockets. To generate the required cash flow, he first focused SpaceX on offering vastly reduced space transportation services to businesses and governments, launching satellites and supplying the International Space Station (ISS). 2 Copyright © 2023 McGraw Hill Education. All rights reserved. No reproduction, distribution, or posting online without the prior written consent of McGraw Hill Education. This document is authorized for use only by Jiting Ye in AD715 AY 2023 - 2024 taught by VLADIMIR ZLATEV, Boston University from Aug 2023 to Feb 2024. For the exclusive use of J. Ye, 2023. In 2019, SpaceX began offering Starlink, a satellite-based internet constellation, providing high-speed internet access to every location on Earth. In 2020, SpaceX made history by shuttling NASA astronauts to and from the International Space Station in the first crewed orbital spaceflight from the U.S. since the Space Shuttle program’s retirement in 2011. In 2022, when Russia invaded Ukraine, Musk donated Starlink equipment and internet services to Ukraine to enable critical communications for the defense forces, emergency services, government operations, and civilians. Providing the Starlink equipment and services to Ukraine cost SpaceX $100 million during the first year of the war. SOLARCITY In 2006, Elon Musk co-founded SolarCity, a renewable energy services company, with his cousins, Lyndon and Peter Rive. The clean-tech startup’s mission was to provide affordable solar energy to homeowners, businesses, and government organizations. OTHER VENTURES Hyperloop: In 2013, Elon Musk published a white paper proposing the Hyperloop, a high-speed transportation system using near-vacuum tubes for reduced air resistance, allowing passenger and cargo pods to travel at speeds of over 700 mph. Musk’s research motivated other
