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Creativity & Innovation

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Paper Title Tesla Motors game changing innovations in electric cars

Written by - Rasika Wanganekar
PRN - 15020841152
Section C

INDEX

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Topic name
Abstract
Introduction of company
Teslas innovation vision
Teslas growth strategy
Creating supporting environment for technology development
Future Prospects
Bibliography

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Tesla Motors game changing innovations in electric cars

Rasika Wanganekar
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Abstract
Changing times are pushing entire population towards being more environmentally
sensitive in every possible area. Increasing transportation efficiencies is best solution to

reduce carbon emissions which happens due to increasing use of automobiles across the
globe. Electric cars promise to bring about a transportation transformation whose time has
come. After early initiations of William Morrison in 1890 many big industries has failed to
create an impact in evolution of electric cars. Tesla Motors is an American based company
which is doing pioneering and revolutionary work in electric car segment. This paper
explores how innovations and radical visions of Tesla Motors changing entire scenario for
global automobile industry.
Key Words :( Electric Car, Innovation, transport efficiency)
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Introduction
In 2003, a group of Silicon Valley engineers who wanted to develop electric vehicles came
together and established an automotive company named Tesla Motors Inc. More
specifically, Tesla Motors was founded by Elon Musk, Marc Tarpenning and Martin
Eberhard. Other remarkable persons like Sergey Brin and Larry Page are among its
investors. It is headquartered in Paulo Alto, California. It had completely owned
subsidiaries in North America, Europe and America. The company at present has 2000
permanent employees. Tesla opened its first store in city Toronto as they wanted to step into
Canadian Market.
Major attraction or X factor behind Teslas innovation is its engineers proved that electric
vehicles could be wonderful substitute of cars which use gasoline as power supplement.
Tesla has not limited itself to only design, manufacture and marketing of electric cars but
they also build platform for advance electric vehicle powertrain components which they
provide to other automakers including Toyota and Daimler. It directly contributes in
supporting green technology at other OEMs.

Tesla Roadster, a completely electric operated sports car was launched in 2008 which got
widespread attention. After success of Roadster Tesla then expanded its technological
advantage to the luxury sedan market. In 2012 Tesla introduced its second model Model S,
a zero emission and sustainable luxury sedan. Recently in July 2015 they launched their
third model named Model X. At present in whole auto manufactures Tesla is the only
automaker that sells zero emission sports car which has serial production.
Teslas Innovative vision:
Main distinction factor between successful and unsuccessful companies is what sort of
innovations company is offering. The reason for the organized innovation management is
the fact that innovative mind is one half of the success, support for innovations the other.
Consequently, for any high-tech company the implementation of innovation management
system is a must. When the co-founder and current CEO of Tesla Motors Elon Musk was
asked about their strategy in 2006, he stated that The starting point is a high performance
sports car, but the long term vision is to build cars of all kinds, including low cost family
vehicles.
An out of box strategy needs breakthrough thinking, and there are at least three operating
principles which prevent breakthrough thinking:
1. The operating principle of seeking precedents:
2. The operating principle of stopping at the why it cant be done stage;
3. The operating principle of looking for insights in the same places we have always
looked for them.
Perhaps the largest block to breakthrough thinking is not a cognitive block. When the
operating principle of seeking precedents kicks in, the first question is always: Has it done
before? And if it hasnt been done before, its not possible. If it were possible, somebody
else would have thought of it. The mindset is one of subservience and the operating
principle is one of seeking precedents.

Toyota and Nissans failed attempts discouraged other players to take up challenge of
establishing electric car market anywhere in the world. So even before Tesla started they
knew that they need to produce the first of its kind a highly innovative product. In 2012,
Toyota maker of the popular Prius hybrid flatly declared it was no longer pursuing an
electric car, because the technology was "not aligned with driver needs." Sure, there were
small fleets of electric vehicles being deployed for local commercial delivery and trucking,
sales, and service fleets, and the like, but sales were still just a small fraction of the total
market.
Of the roughly 487,000 electric vehicles sold worldwide, the majority consisted, or 434000
were traditional first-generation "hybrid" cars that didn't even plug in to charge. Plug-in
hybrids that could charge at home or work made up another 38.5K units; and vehicles
powered solely by battery numbered a small number of 14000, or 0.1% of the car market in
the US. So how did Us market end up just eight years later with Tesla as the fastestgrowing major car brand in the world, with more than one million units expected to sell this
coming year?
Tesla Motors used high-end encroachment market entry strategy. It was disruptive
technology reframing world of automobile sector. Innovations are disruptive if they; are
produced by different manufactures in the supply chain, require new infrastructure and
change the way the in which users interact with the technology. It was also found that
disruptive innovations will firstly fill niches towards the top of the market and then it will
cover downwards into the more competitive mass-market levels.
Teslas growth strategy:

Six Encroachment types for market

As per above model we can make summary for Tesla as below:

1. Develop a high price low volume vehicle: The Roadster
2. Develop a mid price, mid volume vehicle: The Model S and Model X
3. Develop a high on volume, low on price vehicle: Due in 2016-2017 (Called the Model 3
or III).

Fig. Teslas growth Strategy

Fig. above shows distinctive features of Teslas growth strategy. Further part will discuss
those in details.
Roadster
Keeping in mind future expansion through further models Roadster was designed so that it
could serve as a foundation technology for future models. Early adopters of Tesla BEVs are
acting in a reasonable and logical manor by seeking to reduce running costs. Whilst
maintaining the same core and ancillary benefits they receive from this type of high-end,
high-performance vehicle cost reductions are also achieved simultaneously.
Vehicles in this class are generally inefficient because of their weights and large engines.
Repayment time for model Roadster is maximum 4 years and its best among its own class
of competitors. It is 6 years faster than the payback time of Japanese automakers Nissans
model leaf.

Silent drive, zero tailpipe emission and smooth drive are few ancillary

attributes of Roadster.
Mapping value innovation potential of model Roadster as follows:

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Value Innovation model of Roadster
Model S:
Model S stands for second basic stage of three stage market entry strategy of Tesla. Model
S more practical, with 5 seats with the option of 7 and is available for a lower price around
$62,000 (40,000) in the US. This cost factor makes the car price-competitive with similar
cars in the luxury sedan class like Audi, BMW, Lexus and Mercedes. It is very much cost
competitive when compared to other luxury cars in the present western market. Tesla
started making deliveries of model S in June 12and by the end of Dec 2012 they delivered
more than 3100 models. In North America only they delivered 46000 models to their
customers.
In late 2013 sales of the Model S began in Europe and Asia. Orders for the Model S
continue to come in at a rate of 20,000 per annum. By the end of 2014 sales of the Model S
will exceed 50,000 units.

Teslas Model S has received many awards including Car of the year and it was Consumer
Reports highest scoring car that has been ever tested. In that report it said that despite being
an electric car it is the best car on the offer. Further the report mentioned that its electric
drive chain is main reason that model S achieves its high score.
Model X
The Model X has the same basic architecture as the Model S, but with a larger body and 4wheel drive. The Model X is a cross between a sports car, SUV and Minivan with none of
the compromises of any of these vehicle types. The Model X is the first BEV with dual
motor 4-wheel drive. It also has innovative doors allowing easy access to the back two rows
of seats.
The Model X sits in the second stage of Tesla's market entry strategy. The Model X will be
sold at a similar price and volume as the Model S. By having a larger interior capacity and
4x4 drives it is hoped that the X will open up additional markets for Tesla.
Creating supporting environment for technology development:
In almost all cases of innovative and disruptive technology cases new infrastructure is
required. Tesla has developed network of supercharging stations. All battery electric
vehicles need electric charging facilities. They can be charged with standard main supply
which is available everywhere but it results in very slow charge rates. Stations which Tesla
has developed can charge Model S batteries by 50% in 30 min. Customer can use its
supercharger network for free forever and such option comes with purchase of their any
model. By the end of 2014 there were 129 superchargers in the US, 89 in Europe and 34 in
Asia. The sole purpose of this network is so that Tesla can show that it is possible to drive
long distances in electric cars which have been central mind block of people before
choosing an electric car over internal combustion engine car. Tesla Roadster is yet not
technologically compatible with supercharging network but they are working on it.

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Future Prospects:
Despite all negative press Tesla received at initial phases they proved it wrong. Tesla has
created niche market for electric cars and contributing in worlds journey towards going
green. A JP Morgan analyst writes about Tesla that Tesla has been the most outspoken auto
company on the use of autonomous technology to improve inefficiencies and safety of
todays road transport. 100% of Teslas cars are electric, connected, and able to learn
through over-the-air firmware updates at any time. No other established automaker can
claim this today. These are early days, but it is the view of the Morgan Stanley global
auto team that Tesla may be best positioned to advance the state of the art in shared
autonomy. They write that they expect all car companies will eventually see nearly 100%
of their revenues shift from the sale of human-driven/individually-owned cars to robotdriven/shared cars.
To sustain their current model Tesla have to keep innovating. They have to be true to their
mission of To accelerate the advent of sustainable transport by bringing compelling mass
market electric cars to market as soon as possible. Mediocrity seeps into most
organizations and industries because everybody is doing the industry standard. What
differentiates radical innovators and orbit shifters is that they create something new that
makes a huge difference new markets or new business models or new-to-the-world
products. So think Steve Jobs, think Richard Branson, think Elon Musk.

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Bibliography
1. Musk, E. (2013, November 13). The Mission of Tesla. Blog. Retrieved from
http://www.teslamotors.com/blog/the-mission-of-tesla
2. Open Innovation in EVs: A Case Study of Tesla Motors by Achilleas
Karamitsios Master of Science Thesis, KTH Industrial Engineering and
Management Industrial Management, Stockholm
3. www.teslamotors.com

4. Thesis on Government Clean Air Regulations and Tesla Motors by John

B. Willis
5. Musk, E. (2006, August 2). The Secret Tesla Motors Master Plan (just
between you and me). Blog. Retrieved from
http://www.teslamotors.com/blog/secret-tesla-motors-master panjust-between-you-and-me
6. The Teslas Motor Team. (2015, February 27). 2,000 Superchargers.
Blog. Retrieved from http://www.teslamotors.com/blog/2000superchargers