1. What are the macro factors that may influence automakers strategic decision? (General Environment)2. How is the industrial landscape where Tesla is situated? (Apply Five Force Model)3. Facing challenges from the current situation, how do you as a manager of Tesla Elon Musk response?
When Henry Ford made cheap, reliable cars, people said, Nah, whats wrong with a horse?
That was a huge bet he made, and it worked.
Elon Musk1
January 7, 2020. Shanghai, China. Just one year after Elon Musk with a cadre of high-ranking Chinese officials
broke ground on a dirt field near Shanghai China to commence the building of Gigafactory 3, Teslas CEO was now dancing on stage to celebrate the first deliveries of locally made Model 3s.
Teslas stock market valuation crossed the $150 billion threshold.2 This made the electric vehicle startup more
valuable than GM, Ford, and Chrysler combined and the second most valuable auto company globally, only behind
Toyota Motor Corp.but ahead of the Volkswagen Group, the worlds two largest car manufacturers. To put Teslas
stock market valuation in perspective, in 2019, GM and Ford combined made more than 10 million vehicles while
Toyota and Volkswagen each made over 10 million. In comparison, Tesla made less than 370,000 cars.
Just a few months earlier, in the summer of 2019, Teslas market cap hit a low point of $32 billion. Back then,
as the company was trying to scale-up production of the Model 3 to meet demand, many had speculated that the
company would soon run out of cash because it kept missing delivery deadlines and was mired in production hell
(as CEO Elon Musk put it).3
After the raucous delivery party in Teslas brand-new Shanghai Gigafactory, Elon Musk sat back and relaxed
as the private jet took off. As the Gulfstream G700 gained altitude, Elon was trying to catch up on his sleep, but a
couple of things kept him awake. In particular, the Tesla CEO worried about how the company would continue to
scale-up production profitably, while also launching several new models. Later in 2020, Tesla plans the delivery of
its Model Y, a smaller compact sport utility vehicle (SUV). And in 2021, Musk promises the first deliveries of the
futuristic pickup truckthe Cybertruck. Although Elon Musk was happy that Tesla beat expectations in 2019 by
delivering 367,500 vehicles (Exhibit 1), for 2020 he promises delivery of over 500,000 vehicles.
Perhaps, even more important, Elon Musk worried about future demand in the companys three key markets:
the United States, China, and Europe. Even if Tesla succeeded to ramp up production, will there be sufficient
Professor Frank T. Rothaermel prepared this case from public sources. Research assistance by Laura Zhang is gratefully acknowledged. This case is developed for
the purpose of class discussion. This case is not intended to be used for any kind of endorsement, source of data, or depiction of efcient or inefcient management.
All opinions expressed, and all errors and omissions, are entirely the authors. © Rothaermel, 2020.
Authorized for use only by Haoming Wang in ADMS4900 at York University from 9/12/2022 to 12/3/2022.
Use outside these parameters is a copyright violation.
Tesla, Inc.
Tesla, Inc.
Another issue that troubled Musk, and which leads him to tweet often directly with disgruntled customers, is
the perception that although Tesla styles itself as a luxury car brand, its delivery experience, and customer service
is not up to par. Given a large number of deliveries of Model 3s in the United States during the second half of
2019, Teslas customer service bandwidth and capabilities had yet to catch up. The EV-company began to develop
a reputation, at least in the United States, for launching innovative and paradigm-defining vehicles. Yet at the same
time, many Tesla owners and observers considered its customer service inferior.
As Musk grabbed a low-carb Monster energy drink from the fridge in his airplane suite, he booted up his Lenovo
laptop, and began to organize his thoughts
Elon Musk: Engineer Entrepreneur Extraordinaire
In 1989, at the age of 17, Elon Musk left his native South Africa to avoid being conscripted into the army. Says
Musk, I dont have an issue with serving in the military per se but serving in the South African army suppressing
black people just didnt seem like a really good way to spend time.4 He went to Canada and subsequently enrolled
at Queens University in 1990. After receiving a scholarship, Musk transferred to the University of Pennsylvania.
He graduated in 1995 with bachelors degrees in both economics and physics, and he then moved to California to
pursue a Ph.D. in applied physics and material sciences at Stanford University.5
After only two days, Musk left graduate school to start Zip2, an online provider of content publishing software for news organizations, with his brother, Kimbal Musk. Four years later, in 1999, computer-maker Compaq
acquired Zip2 for $341 million (and was, in turn, acquired by HP in 2002). Elon Musk then moved on to co-found
PayPal, an online payment processor. In 2002, eBay acquired PayPal for $1.5 billion, netting Musk an estimated
$160 million.
Elon Musk is widely viewed as the worlds premier innovator, bringing computer science, engineering, and
manufacturing together to solve some of todays biggest problems such as sustainable energy and transport as
well as affordable, multi-plenary living in order to avoid future human extinction. Musk describes himself as an
engineer and entrepreneur who builds and operates companies to solve environmental, social and economic challenges.6 At one point, Elon Musk led three companies simultaneously that address the issues that are at the core of
his identity and vision: Tesla (sustainable transport), SolarCity (decentralized and sustainable energy), and SpaceX
(multi-planetary existence).
Musk indeed has a larger than life profile and has been described as Henry Ford and Robert Oppenheimer
in one person,7 as well as Tony Stark, the eccentric inventor better known as Iron Man.8 In fact, Musk made a
cameo appearance in the Iron Man 2 movie. In line with his movie avatar, the real-life Elon Musk plans to retire
on Mars.
Elon Musks larger-than-life personality frequently spills over into his Twitter feed. Musk is an avid tweeter and
has had some run-ins with the Security and Exchange Commission (SEC) in the past, as some of his tweets led
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