With limited supply of petroleum available in the market, electric vehicles are becoming a necessity and anticipated to be the future of transportation. Providing batteries to electric vehicles and power them is one of the most crucial aspects of an electric vehicle’s engineering. Batteries used in electric vehicles are powerful enough to deliver sufficient horsepower to hold the charge for a longer duration to make long-distance trips as compared to a conventional vehicle. An electric-vehicle battery is generally used to power the propulsion of battery operated electric vehicles. This case study on Tesla Motors focusses on the company’s introduction, partnership, and future p
With limited supply of petroleum available in the market, electric vehicles are becoming a necessity and anticipated to be the future of transportation. Providing batteries to electric vehicles and power them is one of the most crucial aspects of an electric vehicle’s engineering. Batteries used in electric vehicles are powerful enough to deliver sufficient horsepower to hold the charge for a longer duration to make long-distance trips as compared to a conventional vehicle. An electric-vehicle battery is generally used to power the propulsion of battery operated electric vehicles. This case study on Tesla Motors focusses on the company’s introduction, partnership, and future prospects.
Established in 2003 by Silicon Valley engineers, Tesla Motors Inc., which is believed to be an automotive company, held a clear vision to develop the power back electric vehicles in the market. Tesla Motors was founded by three masterminds Elon Musk, Marc Tarpenning and Martin Eberhard. More specifically, Sergey Brin and Larry Page played the role of investors in the organization. The company aimed to develop sports car, but there goal was to build cars of all kinds, including low cost family vehicles. The overall strategy of Tesla had summed up in three steps. The very first step in 2011 was to release a Roadster model and establish keystone for EVs. In 2012, the new “Model S” was introduced to the market targeting middle to upper class consumers. Finally after two year in 2014, Tesla planned to produce and market a new “Model X”.
Tesla Motors has been a major contribution as a partner with many firms. Firstly, some of its supplier alliances are Lotus Cars, and Panasonic. Moreover, Tesla Motors cooperates with some OEM manufacturers like Toyota and Daimler.
Tesla’s Alliances with other major firms:
Partnering Tesla Motors with Toyota
In the early 2010, Tesla Motors announced to partner with one of its most significant alliance company Toyota. Coming together on the same board, the two companies collaborated aiming to develop production systems of electric vehicles as well as providing engineering support. Initially in May 2010, Toyota acquired around 3% of equity stake of Tesla Motors on $50 million investment. In addition, Tesla Motors will contribute the help to Toyota to create a plug-in electric vehicle, and that vehicle will be the power back electric version of Toyota’s current model RaV4. Tesla Motors will help Toyota in the development of the electric powertrain for RaV4. Moreover, in return, Toyota has aided Tesla Motors by providing engineering and production expertise for its Model S. Through this partnership, Tesla Motors will target to secure its manufacturing facility. It was a confident that this collaboration can boost the company in various industrial forms.
“This is a huge, transforming kind of alliance for this stage of Tesla. They couldn’t have done it early on. It wouldn’t have been appropriate, and Tesla didn’t have the pieces put together to be attractive at that point.” Defined Holmberg. Furthermore, Tesla Motor got the massive push to proceed in the purchasing of a large manufacturing plant in California for the production of Tesla’s Model S.
Through this partnership, Toyota would like to learn from the challenging spirit, quick decision-making, and flexibility that Tesla has. Decades ago, Toyota was also born as a venture business. By partnering with Tesla, my hope is that all Toyota employees will recall that ‘venture business spirit,’ and take on the challenges of the future", Akio Toyoda, the President of Toyota asserted.
"Toyota is a company founded on innovation, quality, and commitment to sustainable mobility. It is an honor and a powerful endorsement of our technology that Toyota would choose to invest in and partner with Tesla.”, says Tesla Motors’ CEO and co-founder Elon Musk. “We look forward to learning and benefiting from Toyota’s legendary engineering, manufacturing, and production expertise", He added.
The U.S. federal government has promptly established various incentives and regulations that bring new entrepreneurs and corporate entrepreneurs to invest in the green-technology vehicle market. The major incentive for newly introduced technologies was the Corporate Average Fuel (CAFÉ) standards, which was established in 1975. The CAFÉ standards hold a committed limit of 27.5 mpg as it was valid till 2010. Furthermore, in 2007, the Energy Independence and Security Act, which was enacted by the Congress, forced the automobile manufacturers to achieve a limit of 35 mpg by 2020. However, the U.S. government has established various programs in order to provide financial incentives to customers.
Getting into the case study of Tesla Motors, it has been highlighted that this company applies product innovation by designing the only EVs in the current market that combine long driving range, sportive performance and design.
By observing the case study of Tesla motors we can see that this company applies product innovation by designing the only EVs in the current market that combine long driving range, sportive performance and design. It also applies process innovation since it combines multiple know-hows deriving from different companies although; it is on top of manufacturing some parts in their entirety.
Regarding the open innovation principles, Chesbrough (2003) states that a successful company should work with people inside and outside of the company in order to make the best use of internal and external ideas. Tesla Motors has applied that strategy by establishing R&D collaborations with major companies. By doing that Tesla motors manages to combine the ideas of its employees with the ones of its collaborators. There have been some significant achievements from these alliances such as an innovative battery technology (Panasonic) and important innovations in the design and manufacturing processes (Lotus and Toyota).
According to Dess and Lumpkin (2005), when the products and the markets become mature, the companies are capable of renewing their technology and product portfolio through corporate entrepreneurship. There are companies that follow that strategy by collaborating with Tesla Motors, Toyota and Daimler are a good example. Both of these companies operate successfully in the ICE vehicle market but they wanted to expand in the emerging EV market. They achieved that by establishing collaboration with a newly established company like Tesla Motors in order to renew their technology and product portfolio. In exchange Tesla Motors has gained valuable know-how from their partnering companies.
Initially, the strategy of Tesla Motors is to work on product innovations by designing innovative vehicles and process innovation by amalgamating several know-hows deriving from different companies. Therefore, Tesla Motors is considered as one of the leading innovative company in the automobile sector.
Furthermore, Tesla Motors efficiently applies open innovation and it holds a process by establishing R&D collaborations with leading companies. However, it freely manages to develop its innovative technologies.
As we can see, in the globalized market the level of competition is tremendously high, it becomes extremely difficult for a start-up company to penetrate the market. Investing in an entirely new car manufacturer requires a huge capital cost. Moreover, an EV company has to invest in infrastructure projects to secure the proper function of the EV network. Hence
Finally, Tesla Motors should underline its green technology nature and the environmental impacts of EVs and therefore urge for a government policy scheme that will further facilitate EV companies.