INB 303 Tesla case study PDF

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It is a summery on the Case Study on TESLA: Internationalization from Singapore to China...

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Case Study on TESLA: Internationalization from Singapore to China INB 303 Assignment Name- Md Rafid Rahman ID- 1722156 Course- INB 303 Submitted to: MR SM Yusuf Mallick

Introduction The case mainly focuses on the journey of the company Tesla from Singapore to china. Important aspect like the origin of the company to their business plan for capturing the international market is mentioned in the study.

Summery Elon Musk was born in South Africa, came to the United States for further education in 1995 and co-founded a company called Zip2. It was an Internet map company which provided directions just like Google Maps. In 1999 he sold the company to compact computers for 300. Later he co found a e-payment company called Paypal. He sold that too for 1.5million in 2002 to ebay. Even after revolutionizing the whole payment system he was still not happy. He then founded Spacex, a company which makes reusable rockets and spaceships. Then in 2004 he joined Tesla as a board member. Tesla is an automaker company which makes fully electric vehicles or EVs. The headquarters of the company is situated in Palp, Alto, California and it was founded in 2003. Elon Musk was the one who set the company's mission statement which is “to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.” The idea of creating an electric vehicle was not novel. Many businesses have attempted and failed to strike a balance between design and efficiency. These vehicles' batteries were not up to snuff. A single charge can only get you a short distance. To address this problem, Tesla teamed up with Panasonic, a Japanese electronics company, to develop a lithium-ion rechargeable battery for electric vehicles. Later Tesla also partnered with automobile manufacturers like Daimler and Toyota. The Roadster, which was launched in 2008, introduced the advanced battery and electric powertrain technology at Tesla. From there, Tesla created the world's first premium all-electric sedan from the ground up, the Model S, which has gone on to become the best car in its class in every category. With the longest range of any electric vehicle, over-the-air software updates that improve it over time, and a record 0-97 kmph acceleration time of 4.4 seconds, Model S has reset

the world's expectations for the car of the twenty-first century. In February 2012, Tesla unveiled a third vehicle prototype, The Model X. It was supposed to be released in 2014.The Model X was designed to be a hybrid of a minivan and a sports utility vehicle. Electric cars' appeal was harmed by a sharp drop in gasoline prices in the United States at the end of 2008. Therefore, to succeed in selling their vehicles to consumers Tesla had to be creative. This electric vehicle, according to Elon Musk, has two major flaws. First, all other car manufacturers in the USA have implemented a traditional dealer-based franchise model. Dealers would face a fundamental conflict between the sale of gasoline-powered vehicles and EVs. As a result, they won't be able to explain the advantages of an EV without jeopardizing their traditional business advantage. Second, when a customer went to a local dealership, the majority of potential buyers had already decided what they wanted to buy. This would reduce the opportunity for the dealer to inform customers of Tesla's benefits. Tesla decided to take a different approach to avoid this problem. Tesla believed that selling its own vehicles would give it more control over the sales process. Factors such as inventory costs, warranty management, and product pricing could all be better maintained. However, there was a problem with doing so. The US legislators in some countries had prevented their manufacturers from directly selling their vehicles to customers. This made it difficult for Tesla to pursue the company's owned dealership. Tesla hired George Blankenship as vice president of design and store development to address this issue. Blankenship suggested that Tesla name its new store ‘Showroom.' This would meet the company's need to educate customers about EVs, and whenever a customer wanted to buy a Tesla vehicle, a company employee would direct the customer to the company's website, where they could complete their order. Blankenship had discovered a loophole in the law enacted by US legislators. Tesla was not breaking any laws by allowing customers to purchase online. However during long-distance travel, customers had problems because the battery was running out. Additionally, charging EVs would take a long time. Then Tesla created two feasible loading options, the universal mobile connector and the wall charger. The mobile charger was for commuting and the wall charger for the customer's home. However that was not working as well as the time required to fuel the vehicle would be inconvenient for daily use. As a result, Tesla introduced "Supercharger stations" across the country where it would take 20 minutes to refuel the half battery, which is a quarter of the original time.

Customers were still not satisfied with the supercharger station. In a country like the United States, it was inconvenient for people to wait 20-40 minutes in a charging station just to refuel. It would be considered a weakness for EVs if they could not refuel as quickly as their gasolinepowered counterparts. To solve that, Tesla had designed a system in which customers can exchange empty batteries instantly with a fully charged battery. In the 2000s, Singapore was one of the world's richest economies. Singapore had a population of five million people and over half a million cars. The Government of Singapore was trying to follow a policy to preserve green and clean cities including air pollution control. Singapore had a technologically advanced infrastructure as well as an information and communications technology infrastructure, making it the perfect place for testing EVs. Around 80% of Singapore's electricity was produced by natural gas. If 30% penetration was possible then it will reduce 7% of the country's carbon emission. The Singapore government announced in May 2009 that it would establish a two-year test-bed program for EVs, dubbed the Transport Technology Innovation and Development Scheme (TIDES). For this test, there were two requirements: companies that could supply EVs and second, companies that could assist in the development of a charging-station infrastructure in the city. The Additional Registration Fee for EVs was reduced by 40% in Singapore (ARF). The TIDES was an excellent opportunity for Tesla to enter the Singapore market, but the Renault-Nissan Alliance had already been named as a partner when TIDES was formed. However, other applications were still being accepted. In 2010, Tesla opened its first store and service center in Singapore. Tesla also submitted an application for the TIDES program. TIDES would allow Tesla to reduce price by 50%. In the meantime, a new player entered the market, the Mitsubishi i-MiEV. After full ARF, the iMiEV cost SG$190,000. The i-price MiEV's would drop to SG$90,000 under TIDES. Tesla's Roadster, on the other hand, was much more expensive, costing SG$250,000 under TIDES. Tesla did not receive tax breaks despite all the hard work and well fitted conditions. The Singapore government provided only four companies with the grant. Tesla did not meet the technical requirements. Tesla was unable to sell a single vehicle in Singapore.

China was well-known for its electric and hybrid vehicle manufacturing industries. They had many famous car manufacturers, including Mercedes-Benz, Hyundai, Toyota, and even Asian companies such as Chery or BYD. Due to China's severe air pollution, the Chinese government has taken steps to reduce carbon emissions. The approach to encourage purchasing EV was one of them. At the end of 2012, the government planned to provide tax breaks to purchasers of EVs. It also suggested potential subsidies would be granted in future to a number of EV manufacturers. However, nothing was confirmed. Furthermore, Tesla lacked knowledge of the Chinese market. NO one in china knew Tesla in China too, Tesla has not been recognized. Another significant issue was that the majority of Chinese people lived in apartments with limited parking space, which was frequently shared with others. Customers in China will have difficulty charging their EVs. The biggest problem was there were not enough supercharger stations. All these issues would result in customers not purchasing the EV.

2. a) What kind of challenges is TESLA facing in its industry? Tesla was trying to introduce something which was completely new in the automobile industry. Therefore in a lot of areas they had to face a number of challenges: ● Design and performance: the first problems that tesla faced with the cars was finding the balance between design and performance. Fully electric cars are not as well performing as gasoline cars. Even if it did, the gasoline cars were way more good looking. ● Customers: there was a downturn in the automobile industry as a result of the financial crisis and buyers were unwilling to consider electric vehicles in the United States. Consumers were so accustomed to gasoline-powered vehicles that they did not care much about EVs. ● Oil price: fuel prices in the United States fell dramatically at the end of 2008, which was Tesla's first year on the market.

● Dealership issues: Elon Musk believed that there were two major issues in the dealership business. The first was that dealers would face a conflict between the sale of gasolinepowered cars and EVs. They wouldn't be able to clarify the advantages of EVs without jeopardizing their conventional market. Second, Musk claimed that when a prospective customer walks into a dealership with a clear mind set of the car to buy. This would limit dealers' ability to educate customers about the benefits of EVs. ● US Law: Tesla wanted to sell their cars from their own dealership however, in 48 out of the 50 states, lawmakers prohibited vehicle manufacturers from selling directly to customers. ● The Charger: Tesla provided a wall charger for home and universal mobile connector for commuting. But refueling or charging the EVs took hours. This would act as a major setback for EVs since gasoline cars would only take minutes to refuel. As a result, Tesla introduced the Supercharging Station, which had a much faster charging rate than before, but it was still unable to satisfy consumers. Then they came up with the concept of battery swapping, which reintroduced Tesla into the game. b) What are the specific challenges that TESLA faces in China? Despite the fact that China being a great market for electric and hybrid automobiles, Tesla was unable to thrive in the Chinese market. Mercedes-Benz, Hyundai, and Toyota were among the popular EV manufacturers in China and Asian brands such as Chery and BYD were also competing. Customers with a high income and status bought popular branded vehicles, while those with a lower income went for Asian brands. Tesla's Challenges in China were: ● Giant manufacturers and Asian manufacturers were well known in the Chinese market they already captured most of the market shares. Therefore completion was high. ● Tesla didn't have much knowledge about the Chinese market. ● Charging is essential for EVs. Since Chinese people mostly lived in apartments with limited parking space, which was also shared with others, availability of infrastructure was a major problem.

● The most crucial problem of all was the lack of Supercharging stations in China. c) What, if anything, can TESLA Learn from its expertise in the United States and Singapore as it develops an entry strategy for China? Tesla can learn a lot from the challenges it faced in china. China is one of the largest economies in the world. In order to capture the Chinese market the company can follow the following strategies: ● Marketing Strategies Tesla can market the name of the company. Marketing and advertising a company can make great on the mindset of the people. Even a harmful and addictive product such as cigarettes is still successful due to subtle promotion of the product in movies and TV series. In this case the name of the brand is very important. If Tesla can promote their product in the right way then it can easily become a brand in china and can compete with both Asian and giant automobile companies in the Chinese market. Apart promoting their product and establishing the company’s brand image. Tesla should concentrate on developing good customer relationships. The company should provide immense attention to their customers and gather their feedback. This will keep them well aware of the customer’s needs and also provide them better knowledge of the market. Tesla can also keep the customer well informed about their product. With good customer relations the customers will stay loyal to the company. ● Market penetration strategy Tesla is a completely new company in china. The people do not know tesla and neither tesla has crucial knowledge about the Chinese market. Therefore as a newcomer Tesla can find local dealers to work with them or find automobile companies which have good knowledge about the market and work with them. ● Cheap parts and manufacturing

Instead of manufacturing the cars completely in the US then exporting it Tesla can either find cheaper parts dealers from different countries, assemble it and then export to china or they can set up manufacturing completely in china. They can follow both the strategies. They can get the part from different suppliers at a cheap cost and assemble the car in china. This will help the company to save a fortune and they can sell the car at a cheaper price. d) Develop a plan of action for TESLA in China In order to find the best plan, Tesla can first look at the challenges they are facing and then find solutions to the problems. The solutions are: ● Lack of supercharging station: the most crucial problem that Tesla faced was there were not enough supercharging stations in china. So even if they had introduced the best vehicle with a lot of benefits. Solely for this reason people will not buy the vehicle. However this problem can be easily solved with the support of the government. China is encouraging the use of EVs to reduce pollution. So soon the government will take initiatives to make supercharging stations available throughout the country. ● High completion: there are already well known companies like Mercedes-Benz, Hyundai, Toyota and other Asian companies like Chery or BYD competing in china. So in order to compete with them Tesla needs to increase their brand recognition. They also need to be well aware of the market. RND investment might prove to be very beneficial for them. ● New product line and management changes: Tesla can introduce a new line of vehicles targeting the mid-level income customers. This would make more options open to the customer and they can get more market share. They also need to make changes in the product as well as the management operating in the china to fit the culture of the country. Since China gives great importance to its culture. ● Joint venture: Since Tesla is a newcomer company in china which lacks market knowledge; Tesla can start a joint venture or distribution partnership with a company which knows the market and learn their strategies. Kawasaki and Honda went for a similar approach and worked with Bajaj and Hero to enter the Indian market.

3. Provide conclusions and recommendations based on the situations described in the case. Tesla is a very successful company which has started a very unique approach to perceive automobiles. Their business aims to give all the pleasures of a car in an environmentally friendly way. Electric vehicles are not something new or unperceivable however EVs were not something which can be compared to gasoline vehicles. Tesla’s approach to compete with gasoline vehicles was a very brave move. The approach was also environment friendly for which they will be deemed as a green or sustainable business. China is looking for a way to reduce pollution and has one of the largest economies in the world which makes it the ideal location for Tesla to expand to. If they invest more in market research and make supercharging stations available all over the country then the Tesla can easily become one of the top competitors in China.

References (2021). Retrieved 30 April 2021, from https://webofproceedings.org/proceedings_series/ECOM/EDBM%202020/EDBM20229.pdf Tesla in China: Dominating the EV market with 0 marketing budget - Daxue Consulting - Market Research China. (2021). Retrieved 30 April 2021, from https://daxueconsulting.com/teslain-china/#:~:text=Takeaways%20from%20the%20strategy%20of%20Tesla%20in %20China&text=In%20essence%2C%20Elon%20Musk's%20China,Tesla%20cars%20on %20the%20road....