Alternative Strategies Of Tesla: Automotive Industry Structure

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One 800 word essay
Preparation:
visit tesla.com
www.tesla.com/powerpack
www.solarcity.com
What are Tesla Inc. true core competencies?
Based on a quick analysis of the automotive industry structure, would you stay in the auto industry as an independent car maker? Why or why not?
Considering the amount of capital required to succeed as a car maker, evaluate the opportunity cost associated with Tesla Inc.’s staying in the auto business as an independent auto maker.
If you find yourself short of ideas some quick searches on Bloomberg.com and the WSJ could give you ideas. Also, you could take a quick look at analyst reports.
The key to this essay is weighing the alternative strategies – does TESLA have what it takes to compete with a US$ 40 billion investment in electric vehicles planned by Volkswagen alone, and the tens of billions pledged by other car makers?
A lot depends on what you identify as TESLA’s core competency – which may not be car manufacturing.
Consider an analogy with Apple’s iPhone which has design and brand features that earn it a huge premium over cost; can the same business model be replicated in the auto industry, and are there enough buyers who can afford to pay a 20% premium on a car with the promise of future fuel savings?
And finally as fuel efficiency of its competitors increases and more hybrid cars hit the road, the US government may eliminate the $7500 electric vehicle tax credit – which is basically a $7500 per vehicle subsidy to TESLA.