Tesla Strategic Case Analysis: EV Market Challenges 2018
This paper presents a comprehensive strategic case analysis of Tesla as of 2018, examining the rapidly changing electric vehicle market and Tesla's position within it. The analysis covers the general environment and competitive landscape, noting the entry of virtually every major automaker into the EV space. It then evaluates Tesla's company profile, its sustainability-driven mission, and the serious financial challenges it faces, including persistent cash burn, credit downgrades, and negative working capital. Four strategic recommendations are offered: fulfilling product promises (especially the $35,000 Model 3), addressing reliance on government tax credits, committing to a clear pricing strategy, and overhauling its over-automated manufacturing process. The paper also addresses leadership concerns surrounding CEO Elon Musk and draws on Porter's competitive strategy framework to chart a path forward.
- Industry Overview: The EV Competitive Landscape: Major automakers flood EV market, threatening Tesla's first-mover advantage
- Company Analysis: Tesla's Mission and Financial Realities: Sustainability mission vs. serious liquidity and profitability challenges
- Problem Analysis: Liquidity Crisis and Operational Failures: Moody's downgrade, cash burn, and Musk's misleading public statements
- Recommendation 1: Deliver on Product Promises: Tesla must deliver the promised $35,000 Model 3 immediately
- Recommendation 2: Tax Credits, Pricing Strategy, and Manufacturing: End tax credit dependence, fix pricing strategy, replace robots with workers
- Implementing the Recommendations: Board must replace Musk and apply Porter's competitive strategy framework
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What makes this paper effective
- Grounds every claim in specific, cited evidence — from Moody's downgrades and Morgan Stanley projections to Tesla's own 10-Q disclosures — giving the analysis credible financial weight.
- Moves logically from broad environmental context (competitive EV landscape) to company-level analysis to problem identification to actionable recommendations, creating a coherent strategic consulting structure.
- Uses concrete detail (e.g., Tesla burning "$6,500 every minute," 500,000 pre-orders raising $500 million) to make abstract financial arguments tangible and persuasive.
Key academic technique demonstrated
The paper integrates applied strategic frameworks — particularly Porter's competitive forces theory — alongside real financial data and news reporting to evaluate a live business case. This blending of theoretical scaffolding with current evidence is a hallmark of strong undergraduate business case analysis, demonstrating that academic models can generate actionable, specific recommendations rather than generic observations.
Structure breakdown
The paper follows a classic strategic case analysis format: (1) external environment/industry scan, (2) internal company analysis, (3) problem diagnosis, (4) a numbered set of strategic recommendations, and (5) an implementation section. Each recommendation is grounded in earlier analysis, and the implementation section introduces HRM and leadership dimensions not present in the diagnosis, appropriately expanding scope as a real consulting memo would.
Industry Overview: The EV Competitive Landscape
The automobile industry is changing quickly, with more and more competitors entering the electric vehicle (EV) market. Jaguar is introducing its I-Pace, a premium EV with a base model price under $70,000. Audi is introducing its E-Tron Quattro E-SUV and an E-Tron Sportback. Porsche is bringing its Mission E Cross as its second EV. Mercedes plans an EQC Electric SUV. And then there are the lower-priced models — the Hyundai Kona Electric, with a 250-mile battery range, and the Chevy Bolt EV with a base MSRP of $37,495. GM, Nissan, and Volvo all have plans for EVs — as do Volkswagen, BMW, Toyota, Mazda, Infiniti, Peugeot, Citroën, and Ford. Virtually every major auto manufacturer is entering the EV space, which means Tesla's novelty is soon to be no more (Spiegel, 2018). Tesla was the first to bring the all-EV to mass market, but the market has seen Tesla's popularity and is responding accordingly. All major manufacturers are investing in EV, so that even if it turns out to be only a passing fad, competition will be stiff for as long as the trend lasts.
A look at the global economy, the industry, what competitors are doing in the field of EVs, and the consumer interest their vehicles are generating all demonstrate that the industry is changing rapidly and that Tesla by no means holds a dominant position. While investors are happy to back a growth company that is forward-looking and promotes sustainability, consumers may not be so loyal to one EV brand over another if they all produce the same level of style, luxury, and efficiency.
Company Analysis: Tesla's Mission and Financial Realities
Tesla is a forward-looking company, and one reason its stock has enjoyed such a significant run-up is that many stakeholders view it as a growth company. Musk continuously sets high goals for the company, and though they are not always met on time, stakeholders are pleased with the CEO's forward vision. Tesla is viewed as having a high degree of commitment to corporate social responsibility and the imperative for companies to "go green" to address global warming and climate change. Musk has articulated this in Tesla's vision and mission statements over the years. Tesla's mission statement is: "to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible" (Tesla, 2013).
By building its brand around the idea of sustainability, Tesla has identified both a market and a product. With sustainability serving as its reason for being, Tesla aims to meet the needs and desires of its green consumer base, which wants above all else to see the company remake the modern world in its image. The problem is that this vision may be far more idealistic and utopian than reality will currently tolerate. Tesla's CEO and supporters show no signs of being deterred by such realities, however: they are driven and adamant about promoting the sustainability concept. Sustainability serves as the foundation of the company's mission and vision, but reality shows that Tesla faces significant hurdles in terms of liquidity, operating efficiency, capital structure, and profitability. These are the real challenges Tesla must address in order to achieve sustainability — not only for the planet, but for its own business model.
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