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Using environmental analysis tools, assess the strategy of launching Gigafactories in China and Germany in post coronavirus era. (effective, not effective, why? possible outcome...) case_2_tesla.pdf Unformatted Attachment Preview The future of cars: Tesla General Electric Motors Tesla has high hopes for its high-spec electric cars FROM THE 1960s to the 1980s it was a General Motors plant. From then until 2010 it was used by GM and Toyota to make cars jointly. Now the giant car making factory at Fremont in Silicon Valley is in its third incarnation, as the manufacturing base of Tesla Motors, a maker of electric cars set up by Elon Musk, a founder of PayPal and of SpaceX, a rocket-maker. Mr. Musk is a man of big ideas. His long-term aim is to help colonies Mars and die peacefully there. His entry into car making, an industry that has been the graveyard of many ambitions, is almost as bold. Mr. Musk set up Tesla to hasten what he sees as the motor industry’s inevitable switch to battery power. Having started with expensive sports cars, to be followed next year by an equally upmarket sport-utility vehicle, the plan is eventually to move to more mass-market models and become a sort of “General Electric Motors”. Tesla’s current car, the Model S, with prices starting at $52,400, has won rave reviews. Electric motors produce maximum torque from a standing start, which can mean great performance. Tesla has many fans, especially among Californian tech-loving early adopters. They are vocal in rebutting the carmaker’s doubters, who are also not hard to find. So far Tesla is using only a quarter of the Fremont plant’s vast area. This year it plans to make just 20,000 cars as it concentrates on moving into profit. Mr Musk acquired the factory for $42m, far less than it would have cost to build, and bought lots of second-hand equipment. Tesla is doing a lot of things differently from the mainstream carmakers. It produces many key parts in-house, from the battery packs to the slick touch-screen control panels. It is setting up a network of free fast-recharging points for its customers to top up their batteries on the road. It is battling America’s powerful car-dealership lobby so it can set up its own retail outlets. And it is aiming to get its products from the drawing-board to the assembly line at the speed of Silicon Valley tech firms rather than the statelier pace of Detroit’s car giants. Tesla’s manufacturing chief, Gilbert Passin, says the Model S moved from first design to production in just over two years, something he reckons would take a traditional carmaker five or six years. Working in Tesla’s favor is its lack of baggage of any kind. It has no internal-combustion technology to defend, and thus no problem in reaching regulators’ ever tighter targets for fuel efficiency. It has no inherited pension and health-care liabilities and no auto workers’ union. In the past premium car brands have typically taken decades to establish themselves, but perhaps the “millennial” generation, used to seeing new smartphones rise and old ones fall, will be more open to start-up brands, especially ones from Silicon Valley. Much could yet go wrong. Any serious technical flaw could prove fatal to a new firm with no older revenue-generating models to keep it going. Established carmakers could decide to fight Tesla headon—indeed BMW’s new “i” range of electric and hybrid cars seems to be aimed at similar buyers. In the longer term other technologies, such as biofuels, might develop faster than the electric battery. Whether Tesla ultimately succeeds or fails, it offers some important lessons. As Mr. Passin points out, if a small company like his can produce a new car so quickly and frugally, surely car making giants can become leaner too. Another lesson is that car making is still glamorous, and people with Mr. Musk’s talent and bank balance still want to get into it. If he fails, someone else will have another go. The Chinese firms that have been sniffing around Fisker, a struggling Californian maker of hybrid petrolelectric cars, show that start-up carmakers with interesting technology can find willing financiers. A brief history 1 Tesla was founded not by Elon Musk, but rather by Martin Eberhard and Marc Tarpenning in July 2003. The two bootstrapped the fledgling auto company until Elon Musk led the company’s $7.5 million Series A financing round in February 2004, when Musk became the company’s Chairman of the Board. In February 2005, Elon Musk again led another round of financing to inject $13 million more into the company during the development of the yet-announced Tesla Roadster. Then, in 2007, the company raised a $40 million Series C co-led by Musk and Technology Partners. On July 11, 2005 Tesla signed a production contract for Lotus to manufacture complete cars minus the powertrain for what would become the Tesla Roadster. The following July, Tesla’s first production vehicle was unveiled by CEO Martin Eberhard and the company’s chairman Elon Musk at an inviteonly event at the Santa Monica airport. Tesla is now a officially a car company. By the end of 2007, Tesla is in a tough spot. The company is burning through money and in need of new leadership. In December 2007, Ze’ev Drori, a successful high-tech entrepreneur and proven chief executive, became CEO and President. Under Drori’s leadership, 10\% of the staff was laid off but the company became profitable. Yet Drori wouldn’t last a year at Tesla. In October 2008, Musk succeeded Drori as CEO. Drori became Vice Chairman, but then left the company in December. By this time Musk had dumped $70 million of his own money into Tesla. Tesla sold 2,250 Roadster models between 2008 and 2012. It wasn’t easy. The company struggled to deliver orders on time while attempting to reassure potential buyers about its capability. The British car show “Top Gear” didn’t help — they rail the car, leading to a libel battle between Top Gear and Tesla. Top Gear wins. On June 30th, 2008, Tesla unveiled the Model S — the first car they’d really come to be known for. With a starting price of $50,000 and seating for seven, the Model S was supposed to be Tesla’s more “affordable” family sedan. In May 2009, Tesla enters into a strategic partnership with Daimler AG, which acquired a 10\% equity stake in Tesla for a reported $50 million. Today, 10\% of Tesla is worth billions. On June 29, 2010, Tesla raised $226 million in its initial public offering becoming the first America car company to go public since Ford in 1956. Tesla unveiled its first SUV and AWD vehicle on February 9, 2012, the Model X, with delivery (originally) expected for late 2013. The stunning gullwing-type doors featured in the concept will be included in the production vehicle. At the same time, Tesla quietly began building a small network of electric car charging stations throughout California. When the Superchargers were announced in 2012, there were six stations operational. There are now over 200 worldwide, and routes that allow Model S drivers to drive from coast to coast in the US. By 2013, Tesla was cruising along nicely, but then they hit their first big speed bump. Three Model S sedans caught fire following accidents. No one was seriously injured and the company quickly addressed the issues and stated their cars are safe — but not before its stock and public perception took a hit. Following the third vehicle fire, Tesla’s stock price dropped more than 20\%. Following a tough 2013, Tesla found its groove in 2014. The stock price is soaring, up 47\% from the low following the Model S fires. The company delivered its 28,500 Model S in July 2014 and are now charging forward with the introduction of new models. In the middle of 2014, Tesla announced that it would be using everything it’s learned about making cars so far to introduce a significantly more affordable model. Called the Model 3, it’s estimated starting price will be under $35,000. Alas, no solid release date is given at the time of announcement. Elon Musk tweets that he will “unveil the D”, garnering plenty of chuckles. He later claims the innuendo (“the D” tends to have a specific meaning on the Internet) was totally unintentional. In Tesla’s case, the “D” stands for “Dual Motor”. Three new Model S are introduced in January of 2015: the 2 Model S 60D, 85D, and highest-end P85D. Visually, they’re almost identical to the existing Model S; internally, though, they’re overcharged beasts. That second motor helps the $110,000 Model S P85D go 0-60 in 3.2 seconds (a time they’ll only improve later on). In something that would later become a trend for Musk, he shares his fear of unregulated artificial intelligence work. “I think we should be very careful about artificial intelligence,” he says. “If I had to guess at what our biggest existential threat is, it’s probably that.” Initially intended to go into production by the end of 2013, Tesla’s first SUV has seen its fair share of delays. They pushed the date back to 2014 to focus on Model S deliveries, then into 2015 so the company could put more effort into its debut in China. As of July 2015, it has yet to ship. The P85D was ridiculously fast from Day 1, but Tesla made it even faster after release — and they did so via an over-the-air software update, no less. The free update tunes the car’s wonderfully named “Insane” mode to get its 0-60 time from 3.2 seconds to 3.1 seconds. After weaker than expected sales in China, Tesla lays off hundreds in the country and begins replacing some of its regional executive team. One of Tesla’s biggest challenges: over half of the United States do not allow car makers to sell cars directly, instead requiring them to sell through third-party dealerships. New Jersey began enforcing this law in March 2014. Tesla fought this law publicly, and it was overturned by NJ Governor Chris Christie almost exactly one year later. “Range Anxiety”, or the idea that you might drive too far away from a sufficiently powerful charger to make it home, is a fear that many would-be electric vehicle buyers might have. Tesla addresses this with an update that constantly calculates your distance from a super charger. If there’s any chance you might get stranded, the car warns you… twice. Branching beyond cars for the first time, Tesla unveils a new business arm in April 2014 that focuses on ending our dependence on grid power and switching instead to solar energy. The first Tesla Energy product is ‘Powerwall Home Battery’, a massive battery for storing solar energy at home. The purchase of Michigan-based Rivera Tool marks Tesla’s first presence in Michigan — a state where the auto maker is not allowed to sell its vehicles directly. The tool company is renamed “Tesla Tool And Die” In May of 2015, the FTC throws its weight behind Tesla’s fight to sell directly to consumers. “A fundamental principle of competition is that consumers – not regulation – should determine what they buy and how they buy it,” writes the FCC. In a crazy move, Tesla manages to make the P85D even faster in July of 2015. The car’s “Insane” mode becomes “Ludicrous” mode, shaving the 0-60 speed from 3.1 seconds to 2.8 seconds. Alas, unlike the first improvement, the upgrade isn’t free this time. Requiring new hardware that can handle higher voltages without melting, the upgrade costs $5,000 for existing P85D owners. With this upgrade, the P85D becomes one of the Top 20 fastest accelerating production cars in the world. “It’s like having your own private roller coaster”, said Elon while announcing the enhancement. In something of a surprise move, Tesla announces that they will be reviving the Roadster line “in 4 years”. The Roadster was the first car the company ever made, but they ended its production in 2012 to focus on the more affordable Model S. In September of 2015, the first pre-ordered Model X’s are delivered, with the first handful of owners accepting the keys to their new rides directly from Elon on stage. It’ll take a while before most of the pre-orders are accounted for, though; by April 2016, new pre-orders are still backordered for months. Roughly 2 years after first discussing it, Tesla finally pulled back the curtain on their more affordable model, the Model 3, on March 31st of 2016. The base model will start at $35,000, do 0-60 in 3 under 6 seconds, and is scheduled to start shipping at the end of 2017. Like the Model S and X, it has a big ol’ tablet in the center of the dash — but it’s now rotated to be widescreen, rather than portrait. Preorders opened the night of the announcement. Before the announcement had even started, 110,000 cars had been pre-ordered. By the end of the night, they were at 150,000. This is 3x more cars than Tesla shipped in all of 2015. The great Elon Musk empire is uniting. Yes, Elon Musk’s Tesla offers to acquire Elon Musk’s solar panel installation company SolarCity for $2.8 billion. Together the companies could allow you to outfit your home with solar panels that power a giant battery for everything inside, as well as your electric car. If the deal goes through, it would see SolarCity stock exchanged for Tesla stock. The deal would pay a premium of 21 percent to 30 percent on top of SolarCity’s value of $2.14 billion, so Tesla would be buying SolarCity for between $2.59 billion and $2.78 billion worth of its stock. High stake gamble In 2014, Nevada had voted to grant Mr Musk $1.3 billion worth of tax credits and other benefits to ensure he builds Tesla’s $5 billion “gigafactory” for making lithium-ion batteries for its electric-vehicle (EV) programmed near Reno. Panasonic of Japan, Tesla’s partner in the lithium-ion venture, had already promised $1 billion towards the humongous plant. Tesla will build and manage the gigafactory and occupy half the premises to assemble battery packs for its electric vehicles. Panasonic will use the other half for manufacturing the thousands of lithium-ion cells that go into each pack. Two innovations have contributed greatly to Tesla’s success, and distinguish its EVs from all others. The first, and most significant, is that its electric cars are capable of travelling 250 miles (400km) or more on a single charge, where other EVs manage between 75 and 110 miles at most. That puts Tesla’s electric vehicles more on a par with conventional petrol- or diesel-engined cars, and greatly reduces the “range anxiety” that plagues owners of other EVs. Tesla’s second distinguishing feature is that its EVs use thousands of standard laptop cells, rather than several hundred much larger and pricier proprietary units. In Tesla’s case, the small, cylindrical “18650” lithium-ion cells (so called because each is 18mm in diameter and 65mm long) are wired together to form a flat battery pack that stretches beneath the floor of the vehicle. The pack can be detached from the car’s underside and a fresh one bolted on in minutes. So far, no such battery-exchange service has been offered. But the option is there if needed. The biggest advantage of using standard 18650 cells is that they are a commodity item. Over the years, all surplus cost has been squeezed out of them by the sheer scale and competitiveness of the laptop business. Even on the retail market, 18650 lithium-ion cells can be bad for as little as $4 a piece. Tesla probably buys them wholesale for less than half that price. Apart from cost, there are technical advantages of using 18650 cells. Because they are small, they can shed heat rapidly. By pumping liquid coolant between them, Tesla can remove any heat produced so quickly that all individual cells are kept within a few degrees of one another. As well as preventing any damaged cell that overheats from affecting others, being able to keep all of them cool makes charging easier, improves reliability and lengthens battery life. It also allows more energy-dense materials to be used—which, in turn, reduces their weight and increases the vehicle’s range. One further advantage is that, because the liquid-cooling system itself has temperatrure sensors, the safety circuitry normally built into each lithium-ion cell—to prevent thermal runaway and the possibility of fire—is no longer necessary. That makes Tesla’s 18650 cells cheaper still to manufacture. While all EV makers are notoriously shy about revealing the costs of their lithium-ion batteries, the consensus figure for the industry is between $400 and $500 per kilowatt-hour. Given its unique advantages, Tesla is probably nearer $350/kWh. If that is the case, the 85kWh battery in its Model S 4 probably costs around $30,000—cheap, but still over a third the basic price of the vehicle. Tesla’s task now is to get battery costs down to less than $250/kWh. This is where the gigafactory comes in. When in full production, the plant will be capable of producing 35 gigawatt-hours worth of lithium-ion cells a year—more than the worlds entire production of lithium-ion cells last year. When these are assembled into battery packs, they could provide power sources for 500,000 EVs. That is an awful lot, for J.D Power and Associates, a market research firm in California, expects EVs to make up less than 2\% (ie, 1.3m) of all new cars bought around the world by 2020. Clearly, Mr Musk thinks the numbers add up. In 2013, his company sold around 20,000 Model S cars, its sole product at the moment. Having started to deliver vehicles to China and Europe, Model S sales could edge up towards 30,000 this year. From now on, though, the going will get tough. Carmakers such as Audi, BMW, Cadillac, Mercedes and Porsche have introduced luxury EVs of their own that will go head-to-head with the Model S. But Tesla is more than a one-trick pony. In late 2015, it launched its more affordable Model X, an SUV which is built alongside the Model S at Tesla’s assembly plant in Fremont, California, sharing many of the same components as well as the battery system. Following a recent expansion, the assembly line there can now produce up to 56,000 vehicles a year. That would be the upper limit of Tesla’s sales until its third-generation EV, the Model III, arrives in 2017. It is not clear where this will be assembled, but a dedicated line for 100,000 units a year has been specified. With an entry price of $35,000, the Model III is to have a range of at least 200 miles and compete in the executive (rather than luxury) segment of the market alongside such conventional vehicles as the BMW 3-series, Audi A4 and Mercedes C-class. If everything goes according to plan, adding the Model III to its line-up could raise Tesla’s total output to 150,000 units a year. Hence the need for the gigafactory. Tesla already accounts for a large proportion of its suppliers’ output of 18650 cells. Panasonic recently built a new battery factory in Japan to help meet Tesla’s future demand. Even so, Tesla could face a serious shortage of lithium-ion cells if the gigafactory is delayed in any way. At this point, Babbage admits he is a bit lost. The circle he has trouble squaring is the difference between a plant capable of producing 500,000 battery packs a year, and Tesla’s likely output of less than a third that number of EVs. The cavernous plant could, of course, be run on one shift instead of three. But that would defeat the object of using its economies of scale to drive the cost of batteries down by at least a third. Tesla could always add other EVs to its range—a panel van, a sportscar (to replace Tesla’s original Roadster), or even an urban runabout like the Mercedes Smartcar. But none would mop up anything like enough spare capacity to change things significantly. There is always the chance that Tesla could become a big supplier of lithium-ion battery packs to other EV makers. The company already provides a limited number to Mercedes and Toyota (both of which have minority stakes in Tesla) for a couple of their small EVs. For wider acceptance, though, many proud names in the automobi ... Purchase answer to see full attachment