Tesla Motors Porter’s Five Forces Analysis, Case Study Example

Tesla Motors is one of the most successful electrical vehicle manufacturing company in the world. The company currently boasts a myriad of accolades since its inception. Tesla Motors is involved in designing, developing, manufacturing and selling electric vehicles as well as powertrain components of advanced electric vehicles.

The company has a rich history that is defined by innovation and pioneering since its incorporation in 2003. The company’s first major recognition came with the production of the Tesla Roadster, writing history as the first entirely electric-powered sports car (Tesla Motors). One of the main factors that has led to the company’s success in a relatively short period of time is its management and market strategies. The company developed a strategy to enter the market developing premium electric sports cars, then diversify into the more affordable compacts and high-end sedans (Harryson and Keller).

Five Forces Analysis of Electrical (Alternative) Vehicles Industry

Threats of New Entrants

There is a relatively low threat of new entrants into the electric vehicle industry. This is because entry into this market is capital intensive and requires a great deal of expertise to initiate. There are few cars that compete in this industry, with most of them spread across the various niches within the industry. Most of the players in the industry collaborate with each other. Most companies in the industry have existing synergies with Tesla Motors.

Threats of Substitutes

The threats of substitutes is very high in this industry. The large barrier to entering this market has been driven by the large number of substitutes that are available in the form of hybrids and plug-in hybrids. Some of the biggest substitute threats are the low displacement turbo charged diesel vehicles that have considerably low emissions and economical in terms of fuel consumption.

Bargaining Power of Suppliers

Suppliers have considerably high bargaining power in this industry. However, Tesla realizes very low bargaining power from its suppliers owing to its procurement policies. The company sources its Li-ion batteries from different suppliers, significantly reducing the bargaining power of battery companies. The company manufactures its engines in-house as well as its chassis and engineering functional areas. However, the production of the Roadster entailed an exclusive chassis and engineering partnership with Lotus. There is considerably high supplier bargaining power when it comes to the Tesla Roadster (Harryson and Keller). The company develops its own transmissions as opposed to outsourcing this functional area.

Bargaining Power of Buyers

Buyers have modest bargaining power, relative to the type of buyer. Tesla has two main types of buyers; (1) individual customers who have low bargaining power owing to the high demand of Tesla Motors products, and (2) corporate buyers, such as Toyota, Daimler who make up a considerable share of the company’s business, giving them modest bargaining power (Fleming).

Intensity of Industry Rivalry

Industry rivalry is considerably high. How ere, Tesla has a unique position in its market niche where there are very few companies and car models competing. Tesla has also curved out a name as the producer of the longest-range electric vehicles, with little to no technology to rival theirs.

In conclusion, Tesla Motors is a market leader and pioneer in the electric (alternative) vehicle industry. The company has created its own niche by pioneering long-range and luxury cars. Through its market strategy, it has managed to gain dominance in the market in a very attractive industry. Its position is currently secured, but investments by European companies may alter this state in the next few years.

Works Cited

Fleming, Bill. “Electric Vehicle Collaboration – Toyota Motor Corporation and Tesla Motors.” Vehicular Technology Magazine, IEEE (2013): 4-9. Electronic Source.

Harryson, Sigvald and Sebastian Keller. Tesla Motors Case II: From Technology Start up to Commercialization Vehicle. CIEL, 2014. Elelectronic Source. 26 April 2015. <http://ciel-lab.dk/wp-content/uploads/2013/04/Case_Tesla-Motors-Part-II.pdf>.

Tesla Motors. “About Tesla.” 1 April 2015. TeslaMotors.com. Online Source. 26 April 2015. <http://www.teslamotors.com/about>.