TESLA TOMORROW THE FUTURE OF TESLA MOTORS
December 14, 2010 University of Wisconsin - Madison Wisconsin School of Business - MBA Team A6 Danielle Boyke Jia Cheng Jared Clevers Michael Schroeder Karen Strupp “On my honor, I have neither given nor received unauthorized aid in completing this academic work.”
TABLE OF CONTENTS EXECUTIVE SUMMARY COMPANY OVERVIEW History Strategic Partnerships Management Manufacturing Infrastructure INDUSTRY ANALYSIS Plug-in EV Market ACCOUNTING AND FINANCE Accounting Practices and Reporting Capital Structure Financial Performance Financial Disclosures Financial Health MARKETING 8 Competitive Analysis and Positions Target Market Product Promotion Price Distribution Channels Service and Repair RECOMMENDATIONS FINAL COMMENTS APPENDICES Appendix A: SWOT Analysis Appendix B: Tesla Company History Appendix C: Strategic Partnerships Appendix D: Tesla Executive Team Appendix E: Manufacturing Infrastructure Appendix F: SWOT Analysis of Model S Manufacturing Model Appendix G: Industry analysis Appendix H: Market Penetration Forecasts Appendix I: The EV and PHEV Market Appendix J: Historic Income Statement Information Appendix K: Historic Balance Sheet Information Appendix L: Historic Cash Flow Information Appendix M: Comparable Companies Used in Financial Analysis Appendix N: Ratio Analysis Appendix O: Department of Energy (DOE) Loan Facility Appendix P: ZEV Credits Appendix Q: Future Contractual Obligations Appendix R: Historical Stock Performance and Wall Street Analysis Appendix S: Capital Structure Summary Appendix T: Wall Street Consensus (Implied Cost of Equity) Appendix U: Cost of Capital Calculations Appendix V: Stock Price Sensitivity Analysis for Bullish and Bearish Outlooks Appendix W: Financial Statement Forecasts
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TABLE OF CONTENTS (CONTINUED) Appendix X: Capital Expenditure Summary Appendix Y: Model S Sales Forecasts Appendix Z: Competitor Analysis Appendix AA: Tesla Roadster and Model S Images Appendix AB: The Tesla Brand Community Appendix AC: Model S Battery Technology Appendix AD: Fuel/ Energy Costs/Mile of Luxury Sedans vs. Roadster and Model S Appendix AE: Range, Battery Pack Costs, and Price/ Mile for EVs Appendix AF: Luxury Models $50-70,000 and Tesla Luxury Model Sales Projections Appendix AG: Pricing Model Appendix AH: Tesla Store Locations Appendix AI: Recommended Model S Marketing Strategy Appendix AJ: Citations for Written Report 49 51 52 55 58 64 65 66 67 68 69 70 72
EXECUTIVE SUMMARY Tesla Motors (Tesla) develops, manufactures, and sells fully electric high-performance vehicles (EVs) as well as electric powertrains. The company‘s primary sources of revenue have been sales of the Telsa Roadster and the electric powertrain development services it provides to other automobile manufacturers. Tesla had its initial public offering (IPO) on July 2, 2010 and is now traded on the NASDAQ Exchange as TSLA. The company is developing a new vehicle, the Model S, which will go into production in mid-2012. After a thorough analysis of the company, we have determined that the future of Tesla Motors depends primarily on the success of the Model S. Based on this conclusion, we recommend: Tesla must implement a marketing campaign around the Model S launch. If battery pack prices fall, eliminate the Model S 160-mile option and reduce the prices of the 230and 300-mile options to increase Tesla‘s competitive advantage. Expand service and repair infrastructure by negotiating a service agreement with Toyota. Tesla should develop additional models on the Model S powertrain and secure the EV niche in the luxury vehicle market before committing resources to develop and manufacture economy EVs. COMPANY OVERVIEW History. Tesla was founded in 20031 with the idea that the same lithium-ion technology used in laptops could be used to...
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