Going Green - Tesla Motor Sports

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Favorite Color: “Going Green”|
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Rashanna Etenburn|
BUSI 510 – Managerial Economics|

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Executive Summary
Tesla Motors is among the top 25 companies “going green” for our economy. Tesla motors is a venture aimed at proving that cars can be environmentally friendly, without giving up the speed and power, purchasers love. The cost of running this amazing, green driving machine is a mere 2 cents per mile. (Ryan, 2008) Tesla Motors is a company looking to produce a high-performance electric sports car, and is backed by a number of high-profile investors. Introduced in June 2006 to the public complete with a test drive by California Governor Arnold Schwarzenegger, the Tesla Roadster is able to go from 0 to 60 in 4 seconds (competitive with Porsche and Lamborghini models), while also delivering 100 miles per gallon (double the efficiency of the Toyota Prius). The car's base price is around $100,000, and orders for the car in 2008 are full per teslamotors.com as of December 2007. Among Tesla's investors include Silicon Valley luminaries like PayPal founder Elon Musk and Google co-founders Larry Page and Sergey Brin. (Venture Beat Profiles, 2012) For the last nine years Tesla Motors has used the Internet to market the company’s only electric car, the Roadster, in foreign nations which has produced less than stellar results. Although Tesla has failed to make a profit and is losing approximately $200 million annually, the unique qualities of the high-performance Roadster have attracted the interest of Toyota. To prove their commitment, Toyota invested $50 million in additional technology that will improve the car’s battery longevity on the road, and finance the research and development of Tesla’s newest automobile, the Model S, which arrived this year (2012). The Model S is the most affordable vehicle within Tesla’s showcase, and is considered a family sedan with a price tag that will run 50 percent less than the Roadster. The less expensive Model S will improve the company’s economies of scale by making a vehicle that is more affordable to the masses. These new developments have better positioned Tesla to enter foreign markets through foreign direct investment rather than using the on-line order method. The expense of tariffs when selling automobiles internationally, especially expensive automobiles such as the Roadster and Model S, limits the market of potential customers by doubling the cost of the vehicle. Foreign direct investment will allow Tesla the opportunity to target a new market through mass production using a low-cost labor force, avoiding the high tariff costs, and also taking advantage of government subsidies as a result of clean-air policies. (Tesla Motors, 2012)

Market Structure
Tesla Motors is an electric vehicle company offering a cleaner, more efficient driving vehicle for our economy. There are few sellers of a homogeneous or differentiated product. Is Tesla Motors a monopoly or oligopoly? An oligopoly is the form of market organization in which there are few sellers of a homogeneous or differentiated product and entry into or exit from the industry is possible but difficult. Oligopoly is the most prevalent form of market organization in the manufacturing sector. The distinguishing characteristic of oligopoly is the independence or rivalry among the firms in the industry. (Salvatore, 2001)

Motivation
Just about one century ago, vehicles were just becoming an item people were beginning to purchase. Speed up to today, and almost everyone in today’s modern society has at least one vehicle, if not two. Vehicles have changed and evolved so much in 100 years that they have become one of the most ubiquitous and important pieces of technology those we as people have ever created…but all that don’t matter if we can figure out how to improve them once more. It’s no secret that we are using up oil reserves that ever-increasing rate. The fact that many politicians try to ignore this or...
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