Tesla and NIO - sustainability of automotive industry PDF

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Along with the development of technology the world is facing serious environmental pollution problems. Accordingly, sustainable development is receiving great attention globally. Specifically, scientists have been looking for clean fuel sources or ways to reduce fuel waste. Electric vehicles (EVs) w...

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INTRODUCTION Currently, the world is researching to develop methods to reduce pollution rates and promote the use of alternative raw materials. Electric Vehicles are born with a mission to serve sustainability. There are many names in this EVs industry. But within the limits of this essay, our group would like to do research on two brands, TESLA and NIO. Thanks to a combination of analytical methods and knowledge learned in class, we have analyzed and synthesized this essay. Sincerely, our group would like to thank Mr. CHRISTIAN LINGEMAN for his guidance to help us develop this essay in the right direction. With the limited knowledge framework, the essay still has many limitations, we would like to ask for your understanding. Again, thank you for your great work.

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Table of Contents PART I. DEFINE THE NATURE OF THE NEW ENERGY VEHICLE AND ITS BOUNDARIES IN CHINA AND THE UNITED STATES..........................................................5 1.

China...................................................................................................................................5

2.

The United States...............................................................................................................6

PART II. ANALYSIS OF MACRO-ENVIRONMENT.................................................................7 1.

The business model canvas of new energy car industry:...............................................7

2.

PESTEL analysis:..............................................................................................................7

3.

Conclusion:.........................................................................................................................8

PART III. ANALYSIS OF COMPETITIVE STRUCTURE AND INTENSITY OF THE SECTOR.......................................................................................................................................10 1.

Main actors in the sector:................................................................................................10

2.

Industry Structure...........................................................................................................10

3.

Porter's Five Forces in TESLA Motors and NIO Inc...................................................10

4.

Business Model Canvas...................................................................................................12

5.

Conclusion........................................................................................................................14

PART IV. ANALYSIS OF STRATEGIC GROUPS.....................................................................15 1.

Constitution of the strategic groups in the electric car industry.................................15

2.

Strategic table group analysis.........................................................................................16

3.

Virgin strategic spaces.....................................................................................................17

4.

The performances............................................................................................................17

PART V. INTERNAL ANALYSIS OF TESLA AND NIO...........................................................19 1.

Internal Factors – Weaknesses and Strengths:.............................................................19

2.

Business Strategy Analysis..............................................................................................20

3.

International Strategy:....................................................................................................21

4.

Core competencies:..........................................................................................................21

5.

Diamond model of strategy:.............................................................................................22

6.

Conclusion on Strategy....................................................................................................24

PART VI. THE FIELD OF POSSIBILITY................................................................................25

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Table of Figures Figure 1. The market share of new energy car in 2020, H1(made by wrtier)..................................5 Figure 2. BMC of the industry.........................................................................................................7 Figure 3. TESLA Business Model B2B scheme (Garyfox,2019)..................................................11 Figure 4. Types of energy consumption in cars.............................................................................12 Figure 5. Business Model Canvas of TESLA................................................................................12 Figure 6. Business Model Canvas of NIO.....................................................................................13 Figure 7. Tesla financial report 2020 (Tesla, 2021).......................................................................13 Figure 8. NIO's key financial results 2020 (NIO, 2021)................................................................14 Figure 9. Strategic group map of electric car manufacturer..........................................................15 Figure 10. Diamond model of strategy..........................................................................................22 Figure 11. Field of possibilities.....................................................................................................25 Figure 12. Analysis of opportunity in targeted markets.................................................................28 Figure 13. Opportunity Graph.......................................................................................................28

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PART I. DEFINE THE NATURE OF THE NEW ENERGY VEHICLE AND ITS BOUNDARIES IN CHINA AND THE UNITED STATES Along with the development of technology the world is facing serious environmental pollution problems. Accordingly, sustainable development is receiving great attention globally. Specifically, scientists have been looking for clean fuel sources or ways to reduce fuel waste. Electric vehicles (EVs) were born to answer these questions. In this essay, we would like to investigate Tesla and NIO as 2 representatives from different cultural region in order to see whether this industry worth investing or not. First, we would like to look into the characteristics of supply and demand in order to figure out the nature of the new energy vehicle and its boundaries in China and the United States. 1. China China remains the world's largest market for electric vehicles, with 2.3 million electric vehicles in use, which takes up almost half (45%) of global EV stock. a. The situation of new energy vehicles supply: In mainland China, suppliers of new energy vehicles, especially those mainly selling electric vehicles, fall into three categories: • Traditional independent brands including BYD, ChangCheng and GAC etc., • New local car manufacturers including NIO, Lixiang, Weima etc., • Foreign brands including Tesla, FAW-Volkswagen, , GAC Toyota and so on. In general, the supply side of new energy vehicles in China is characterized by fierce competition in the market, led by BYD and Tesla, and fierce competition among other companies (Zeping, 2020).

Figure 1. The market share of new energy car in 2020, H1(made by wrtier)

b. The situation of new energy vehicles demand: There are 4 different situations of new energy vehicles demand[ CITATION Zep20 \l 2052 ].

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Firstly, 80% customers in China have bought these vehicles powered by pure electric in first half year of 2020 although the Covid-19 influenced negatively the market decreasing the total market sales. Secondly, new energy passenger vehicles are mainly concentrated in China's first-tier and second-tier cities where has strong spending power of customers and developed infrastructure. These cities are: Beijing, Shanghai, Shenzhen, Guangzhou, Hangzhou, Tianjin, Chengdu, Zhengzhou, Liuzhou, Suzhou, mostly coastal cities in China. Thirdly, the trend for high-end and large-scale new energy passenger vehicles is obvious. Chinese customers have focused on the scale, function and quality of these car and displayed propensity to buy high-end and large-scale new energy passenger vehicles. Fourthly, individual consumption for new energy car is the main buying method in the market. 2. The United States The United States has the third-largest electric vehicle market share in the world, surpassed by China and Europe, with about 1.1 million electric vehicles in the USA. a. The situation of new energy vehicles supply: In the US, conventional cars powered by fossil fuels manufacturers are more competitive than electric car manufacturers who are few and far between, competition in market of new energy vehicle is mediocre. Tesla has achieved such a leading position in the new energy vehicle market in the United States. Yet, there are still threats from prestigious brands like Nissan, BMW, Porsche, Mercedez, etc. b. The situation of new energy vehicles demand: There are two situations for new energy vehicles demand in the USA. Firstly, People's purchase intention in USA is often affected by the preferential policies and marketing policies of car companies, especially Tesla. For example, because of Tesla’s attractive marketing strategy that is Tesla’s Referral program which encourages customers to get the word out about their cars with various incentive measures, such as money or discount, and novel and powerful product features of Tesla, most of customers of new energy vehicle has paid more attention on Tesla’s information and want to buy Tesla’s product if Tesla’s new suitable products meet their demands or there are some incentive measures from Tesla. Secondly, most electric car users are concentrated in the coastal cities of the United States, especially the East Coast. According to the report of International Council on Clean Transportation in 2018[ CITATION Pet18 \l 2052 ], in some fiscally sound states, such as Democratic states like California and New York, people are buying new energy vehicles. In these states, green subsidies and higher middle-class incomes have made people willing and able to buy new energy vehicles. In addition, the higher fiscal revenue of these states makes the construction of local charging stations and maintenance facilities more perfect, making it more convenient for people to drive these new energy vehicles.

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PART II. ANALYSIS OF MACRO-ENVIRONMENT We used PESTEL's analysis method and the BMC of the industry to analyze TESLA and NIO from six aspects: politics, economy, society, and technological environment. 1. The business model canvas of new energy car industry:

Figure 2. BMC of the industry

2. PESTEL analysis: TESLA MOTORS

Impact on industry's growth, Weak to strong Threat Opportunity

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1. The U.S. government has shown interest in renewable energy and electric vehicles, because Tesla has received support from the U.S. government and the Department of Energy, so that Tesla can have sufficient funds to develop. 2. In terms of taxation, the US government has also given preferential treatment to attract customers to buy electric vehicles. The government encourages the purchase of vehicles that emit no or very little emissions. So Tesla has a very broad tax advantage, and allows electric vehicles to use the bus lanes without paying to pass. There is a fee or free parking in some public parking lots. 3. Tesla has developed a private dealership store. The channels through which customers can buy are broadened. 4. The government issued loans and subsidies for Tesla's new technology research and development. 1. At the stage of development, most people buy cars with credit. Diversification of financial instruments is also a way to increase sales. 2.Sometimes large economic fluctuations may affect Tesla's stock market. Economical 3. The price of oil has a big impact on Tesla, because if the price drops sharply, consumers will have little or no incentive to buy a vehicle. On the contrary, if the price of oil has risen sharply, which will encourage people to choose electric car. Changes in oil prices are unpredictable, which makes the influencing factors are very uncertain. 1. Tesla uses sustainable resources and invests in sustainable fuels and products, and has won the support of a large number of citizens and governments. Social 2. Tesla adheres to the concept of sustainable development and green energy 1. Tesla has formed a team of auto industry experts and Silicon Valley researchers. 2. Tesla has good resources in Silicon Valley, which gives it an important advantage. And effectively innovated the product. 3. The rapidly developing technology is fuel cell technology. In hydrogen vehicles, there are many Asian manufacturers, such as Toyota, this technology will dominate in the future, and is already providing Technological Hydrogen model. Because Toyota, Honda and even Hyundai are adopting it. The influence of this factor is very large. 4. From the current point of view, lithium-ion battery technology is not the only way for manufacturers. And now the most promising is the lithium-air battery. Toyota and BMW are jointly developing this battery, its efficiency electricity will be ten times that of lithium-ion batteries. It is the first company to develop this technology, and its future will be guaranteed. Conversely, if its competitor is ahead of Tesla in this technology race, its future will be threatened. Environmental 1. Tesla combines its green and sustainable concepts with products, and is developing battery packs combined with solar panels to help utilize the abundant energy of the sun and truly make Tesla environmentally friendly.

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Political

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2. Some toxic gases emitted by thermal vehicles have an adverse effect on health. There is a need to switch to a more environmentally friendly mode of transportation. Contribute to the mitigation of global warming.

NIO

Impact on industry's growth, Weak to strong Threat Opportunity

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Political

Economical

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1. China's political stability in recent years. And there are relevant policies to encourage enterprise development.

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2. Relatively favorable tax policies encourage auto companies to maximize profits.

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3. In a good policy environment, there are also many competitors in the Chinese auto industry which includes profiling of SAIC Motor Corporation Limited BYD Company Ltd. Etc 4. New energy car companies and consumers have been supported by the government in China. 1. The compound annual growth rate of China's electric vehicle market will reach 30.21%. Among all market segments, the passenger electric vehicle segment is expected to occupy the largest market share due to the continuous increase in technological progress observed in the development of battery technology. Nio has a huge advantage here. 2. The automotive industry with development potential also attracts many investors and companies that want to cooperate. 3. As people's spending power increases, more people can buy NIO products.

4. China has abundant domestic human resources and abundant labor resources, which can reduce NIO production costs. 5. Need to pay attention to the financial market because the global expansion strategy is affected by the efficiency of the financial market 1. Now affected by people's consumption concepts, most people think that cars are necessities of life, because people's needs are constantly rising. 2. Online shopping is now more and more convenient, which provides a broader market for NIO. The Social emergence of social media and e-commerce has encouraged customers to shop online. And advertising and marketing also increased a certain number of purchases. 1. Social media marketing methods are more commonly used in China, and the development of information and communication technology has broadened the market. In the modern business environment, the use of social media has become common. Especially effective in promoting products. 2. NIO Power is a power-on solution based on the mobile Internet. It has a wide-ranging network of Technological charging facilities. Relying on NIO cloud technology, it has built a "rechargeable, replaceable and upgradeable" energy service system to provide car owners with full-scene power-on service. 3. The world's first battery replacement black technology, with more than 1,200 patents, is the ultimate power-on experience created for Nio users. It only takes a song to start with a full battery. Each time the battery is changed, a three-electric self-check will be carried out to ensure that the vehicle and battery are always in the best condition. 1. Some countries provide subsidies to encourage investment in green technologies and sustainable Environmental development technologies. NIO can benefit from it and invest in new energy to implement green environmental protection to the end.

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3. Conclusion: The macro environment can help the company analyze the impact of external factors on the company at this stage or the factors that may affect the business in the future. For TESLA, the support of the US government is the most important, because the government has created a good investment environment and development space, and has also given certain preferential and convenient tax policies. Tesla does not manufacture all-electric cars, but also manufactures infinitely expanding clean energy power generation and storage products. The advanced all-electric car "Model S" they designed has become the best car of its kind in all categories. The company's mission is to accelerate the world's transition to sustainable energy. Consumers’ attitude towards Tesla also affects Tesla’s production and development, which is environmentally sustainable. This kind of vehicle does not require any fuel and is better for our already-polluted environment. Therefore, it has the concept of green and environmental protection and is more popular with consumers.

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The impact of the external environment on Tesla is also very important. The increase in demand for electric vehicles is mainly related to the development of technology and the global economy. Similarly, batteries are also very important for electric vehicles because the technology is constantly evolving. New energy brings new opportunities to the market. Currently Tesla has updated their equipment, and they plan to equip their models with completely unmanned technology and systems. For companies, it is important to determine the government's influence. Trade policies can increase or limit industry performance. As far as Tesla is concerned, government support and encouragement can give them a better space for growth. With the continuous consumption of non-renewable resources and the deterioration of the ecological environment due to the emission of greenhouse gases, cars with renewable, nonpolluting new energy sources as the main energy supply method have gradually appeared on the market. As a major country in automobile production and consumption, China’s energy consumption of traditional fuel vehicles continues to increase, and many problems have led to environmental degradation. With the continuous maturity of new e...