Will Tesla Motors Succeed in China (Essay Sample)

Will Tesla Motors Succeed in china?
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Brief History of the Automobile
Francois Isaac de Rivaz built the first automobile in 1807 powered by an internal combustion engine that ran on fuel gas (a mixture of hydrogen and oxygen) which eventually led to the development of the modern gasoline fueled engine towards the end of the 19th Century. The development of the modern motor vehicle is widely believed to have began in 1886 with the development of the Benz Patent-Motorwagen by Karl Benz, a German national. Electric powered motor vehicles made a brief appearance at the beginning of the 20th Century but disappeared again only to resurface in recent years with likes of Tesla motors. (Glancey, 2013)
The early history of the motor vehicle can be put into several eras based on the means of engine propulsion. Recent eras are however grouped depending on trends in size, utility preference and exterior styling.
Early Automobiles
Steam-powered wheeled vehicles (17th to 18th Century)
The first steam-powered vehicle was developed in 1672 by Ferdinand Verbiest as a gift to the Chinese Emperor. It was however too small to carry around a driver but it still considered as the first steam powered automobile. Large enough steam powered vehicles that were able to carry a driver were developed much later on in the 18th Century. (Glancey, 2013)
18th Century
Josef Bozek developed an oil-fired steam automobile in 1815. In 1838, Walter Hancock came up with a four-sitter steam phaeton. A Canadian named Henry Seth Taylor tested his four wheeled steam buggy in Quebec in 1867. (Eckermann, 2001)
Electric automobiles
Anyos Jedilk developed a crude version of an electric car in 1828 by creating a small model car that was powered by a newly developed electric motor. An American named Thomas Davenport installed his direct current electric motor in a model motor vehicle that operated on an electrified track. These Electric cars were hugely popular towards the end of the 19th Century and the beginning of the 20th Century due to their comfort levels, and operational ease. However improvements of the internal combustion engines like the internal electric starter as well as a superior range when compared to the electrical engines greatly eroded their advantage. Mass production of these gasoline powered vehicles by Ford Motor company also greatly reduced their costs coupled with an improved petroleum infrastructure. (Glancey, 2013)
Modern Era
The modern era here is used to refer to two the previous two decades and their improvements in motor vehicle designs and safety standards. There are key technical and design concepts that set apart antiques from modern motor vehicles. The modern car era has seen increased use of platform sharing, computer-design and standardization. There have been improved developments as seen in the increased adoption of the all and front wheel drive vehicles, the widespread adoption of the diesel engine and various improved modes of fuel injection. A majority of modern passenger vehicles are front wheel drive vehicles with engines that are transversely mounted. (Eckerman, 2001)
Body styles have also evolved and improved a lot in this modern age. The three main types of bodies that dominate the auto market are the sedan, sport utility vehicle and hatchback. All these body styles were initially aimed at practicality of the car to the users but they have gradually changed into sports wagons, crossover SUV as well as big MPV vans. The modern cars also have much more improved fuel efficiency and increases horse power. Computerized engine management systems have led to a reduction in vehicle engine emissions with the environment in mind. (Eckerman, 2001)
The 2008 economic crisis greatly reduced vehicle sales globally with the market shrinking by up to 30% for some vehicle manufacturers like Toyota, Nissan, Ford and Chrysler. Ever since the end of the economic crisis in 2009, China has emerged as the worlds top car manufacturer its production levels surpassing those of the U.S.A, all of Europe as well as Japan. There has also been an increase in the manufacturing of transnational vehicles that share similar platforms as well as re-badging or badge engineering so as to satisfy different consumer segments and markets. (Glancey, 2013)
About Tesla Motors, Inc.
Tesla motors is an American auto company that manufactures electric vehicle power train as well as electric motor vehicles. It was founded by Elon Musk (Chairman & C.E.O), Martin Eberhard, Marc Tarpenning, JB STraubel and Ian Wright. The company’s headquarters is Palto Alto, California. It is a public company and trades on the NASDAQ stock exchange with TSLA being the company’s stock symbol. The company posted profits for the first time in a decade in the first quarter of the year 2013.The annual revenue for the company in 2013 was US$2.013billion with a profit of US$61million.The company gained popularity through the production of Tesla Roadster which was the first sports car that was fully electric. The company’s second production car was the Model S which was a luxury sedan that was fully electric. (Marcovici, 2013)
The company also produces and sells electric power trains and their components like lithium-ion batteries to other vehicle manufacturers like Toyota and Daimler for their hybrid cars like the Toyota prius. The company has a vision of being an independent motor vehicle manufacturer with the long term aim of making its electric cars much more affordable for the mass market. The company is named after physicist Nikola Tesla who was a renowned electrical engineer. Their flagship model, the Tesla Roadster, has an alternating current motor that is linked to Nikola Tesla’s original design in 1882. The Tesla Roadster is the pioneer production vehicle that makes use of lithium-ion batteries and also broke the record of being the first production electrical vehicle with a travelling range of 320 kilometers per single full battery charge. The company sold around 2,250 of the roadsters globally between 2008 and 2012. The company employed as many as 3,000 full time employees by March 2013. (Tesla Motors, 2012)
Tesla’s Corporate Strategy
The company’s strategy was to initially enter the motor vehicle market with expensive products that mainly target the affluent high-end consumers and then gradually shift focus to the bigger, lower priced markets as the company’s products gained more acceptance and matured. Many technology companies in silicon valley employed this tactic as seen with prices of computers, cell phones which normally begin high but subsequently dropped with ensuing product cycles. The Roadster’s price at its launch stood at US$109,000 the next model, the Model S’ base was priced at US$57,000 the company also plans the model bluestar which is set to be priced at US$30,000. (Marcovici, 2013)
The company’s goals are as follows;-
* To sell its own cars on-line and in company-owned showrooms.
* To sell more power trains to other motor vehicle manufacturers.
* To serve as a catalyst in the auto industry that will lead to the widespread adoption of electric vehicles by the conventional consumer.
The company’s key focus is on electric propulsion technology with increased ranges of more than 200 miles. The Company C.E.O, Elon Musk scooped the 2010 Automotive Executive of the Year Innovator Award for his role in promoting the steady development of electric vehicles in the global motor vehicle industry. (Dunne, 2011)
Business Model
The company operates galleries or stores that are normally located in large shopping malls in about 23 U.S. states. Prospective customers do not buy their vehicles on from these galleries but they have to place orders directly from the auto company’s website online. These galleries in the shopping malls merely act as marketing points whereby the general public can learn more about the company and the vehicles it manufactures. These galleries are also mainly located in states that have highly restrictive dealership protection legislation that restrict price discussions, test drives, finances as well as other restrictions. (Billmaier, 2010)
This business model of making direct sales to its customers and owning its own service centers and stores is a key departure from the more common dealership models that are more common in the North American automotive market place. As it stands currently, Tesla is the only motor vehicle manufacturer that sells its vehicles directly to consumers a departure from all the other auto makers who utilize car dealerships that are independently owned. About 48 states have legislation limiting or even banning auto makers from directly selling motor vehicles to consumers. Tesla itself does not have dealerships but this has not stopped auto dealers from filling law suits against the company in a bid to stop Tesla from operating in some states. Whilst Texas and Virginia are amongst the staunchest opponents of Tesla, North Carolina and New Hampshire are amongst the states the strongly support the company’s business model. (Marcovici, 2013)
Texas at the moment has the harshest legislation that seeks to protect third party dealerships. The laws require all brand new motor vehicles to be bought via third party auto dealerships thus blocking the company from selling its vehicles in the lone star state. In order for a Texas resident to buy their vehicles, the transaction will be handled as an out of state type of transaction. (Tesla Motors, 2012)
Tesla’s Chinese Expansion Plans
The company has not hidden its intention of having a go at the Chinese market. The company most recently announced its intentions to open its own dealerships in the country. The co...