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2015 Tesla Motors, Inc. INTERNATIONAL MARKET ANALYSIS AND SELECTION Evgeniia Sergeeva, Alexander Solms-Baruth, Pratyush Dudani, Lorenzo Conti, Tian Qin

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Page 1: Tesla Motors Future Markets

2015

Tesla Motors, Inc.

International market analysis and selection

Evgeniia Sergeeva, Alexander Solms-Baruth, Pratyush Dudani, Lorenzo Conti, Tian Qin

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Table of ContentsTesla’s Overview..........................................................................................................................................2

International Operations.............................................................................................................................4

Analysis of Potential Markets......................................................................................................................8

Ireland.....................................................................................................................................................8

Finland...................................................................................................................................................11

South Korea...........................................................................................................................................13

Prioritization and Recommendations........................................................................................................15

REFERENCES:.............................................................................................................................................16

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Tesla’s Overview

Tesla Motors Inc. is considered to be one of the most innovative automotive manufacturers in the

world. It was founded in 2003 in San Carlos, California, by a group of North American investors, including

Elon Musk, JB Straubel, Martin Eberhard and Marc Tarpenning. They created the company with the goal

of “producing electric cars but, with luxury and high performance” (Financial Times, 2015). The company

owes its name to Nikola Tesla, a brilliant Serbian inventor and physicist who designed many solutions

that form the modern alternating power system (Vujovic, 1998).

Initial investments came from Elon Musk, one of the PayPal and Zip2 creators, from which has released

the initial funds to start the new business. Since its creation, Musk has become the CEO of Tesla. He

later added additional funding from Google founders, Sergey Brin and Larry Page, and by the former

president of eBay, Jeff Skoll. Musk was able to accumulate capital of over 180 million dollars in less than

five years. In June 2009, Tesla Motors received a loan from the US government for about 500 million

dollars. The loan was needed for the development and initial production of the Tesla Model S. The labor

force went from 3,000 units at the end of 2012, to about 6,000 in the beginning of 2014 (Fastweb,

2014).

According to Bloomberg, Tesla is trying actively to recruit employees from Apple in order to mold the

image of the Cupertino Company. Elon Musk, the CEO of the US automaker, is said to be "in love with

Apple and appreciates the comparison" between himself and the late co-founder of Apple, Steve Jobs.

Bloomberg reports that "from the point of view of design, (Apple) is closely aligned". Tesla has now

taken over 150 former employees from Apple (Apple Life, 2014).

Models

In 2008 Tesla created the first model, the Tesla Roadster. This car has a range of 340 km, accelerates

from 0 km/h to 100 km/ h in 3.7 seconds and reaches a top speed of 201 km / h. The prototypes were

presented to the public in July 2006, and the first hundred cars were all reserved in less than three

weeks. The Roadster is the first electric car with a range of over 300 kilometers per charge and the first

to use "normal" lithium-ion batteries to power the motor. Between 2008 and 2012, the company

managed to sell over 2,000 models of Tesla Roadster in 31 countries. The base price of a Tesla Roadster

is $108,000. (Fastweb, 2014).

The next model created was the Tesla Model S which debuted in 2012 in North America. The Model S is

a sports sedan model with exhilarating performance delivered by its electric powertrain system.

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Distribution of the Model S into Europe and Asia started in 2013. Unlike that of a internal combustion

engine with hundreds of moving parts, Tesla cars have only one moving piece; the rotor. As a result,

Model S acceleration is instantaneous, silent and smooth. Step on the accelerator and in as little as 3.2

seconds Model S is travelling 60 miles per hour, without hesitation, and without a drop of gasoline

(Tesla Motors).

At the Detroit Motor Show in 2013 Tesla unveiled the Model X, a crossover designed with the aim to

combine the best of a SUV with the benefits of a minivan. The Model X will be sold starting in the

summer of 2015 and 50,000 units will be available for purchase. (Tesla Motors).

The engineers in Palo Alto, home of Tesla Motors Inc. are already working on the Tesla Model III, the

new midsize sedan, which is also fully electric, but with a more affordable price than the current Model

S and therefore, intended to reach wider market sectors. The prototype of this car is expected in 2015

and should provide 320 km of autonomy and a purchase price of $ 35,000 (Quattroruote, 2014).

The development of Tesla Motors INC.

In February 2014, the commercial performance of Tesla pushed prices to record levels, as well as the

title of the brand to the Stock Exchange on Wall Street (Campos, 2014). In September of the same year,

the shares of the Company had reached a new record high after Morgan Stanley outlined the Tesla

disruptive potential not only for the automotive industry, but also for electric vehicles in general.

"Morgan Stanley's Adam Jonas sees huge opportunities for growth in Tesla, Jonas raised his target on

Tesla to $320 from $153. The stock closed at $217 Monday, and it's up 6% in pre-market trading” (Ro,

2014). At the end of the same year, Tesla had launched a new program "happiness guarantee", to allow

buyers dissatisfied with the Model S to return the car within the first three months. At the same time,

the California House announced an agreement with US Bank to reduce the monthly lease up to 25%

(Kessler, 2014).

Industrial Strategies

From the beginning, Tesla Motors has had significant relationships with the Lotus (Fraser et al., 2009),

for example, the Tesla Roadster is based on the design of the Lotus Elise, and it even includes some

components. At the beginning of 2014, Musk announced the construction, in Nevada, of "Gigafactory",

the super factory that, thanks to investments, should produce a very high number of lithium ion

batteries. The area should assume an extension between 500 and 1,000 acres providing ample space to

be devoted to the generation of wind and solar energy (Bal, 2014). Expected additional employment is

about 6,500 new employees. “The Gigafactory (which should be open in 2017) will allow the production

of a true Tesla electric car for the mass market, the Tesla Model III” (The Economist, 2014).

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Prospects of Tesla Motors Inc.

At the end of 2014, Elon Musk announced the strategic turning point for Tesla: “all our patents belong

to you” (Soldavini, 2014). According to Musk, Tesla Motors was created to accelerate the advent of

sustainable transport (Maynard, 2014). Their priority is the development of the electric car market.

Better to join forces to develop the entire market. Musk’s initiatives have enlivened the sector, and large

companies start to move after a period of little interest. It is hard to say whether the expectations of

Musk will be realized soon. However, only 12 years after its appearance, Tesla Motors can be regarded

as an innovative industrial reality capable of stimulating the entire automotive industry.

International Operations(Written by Praytush Dudani)

Distribution and Marketing Strategy

For its distribution strategy, Tesla relies on company owned stores rather than traditional independent

dealer networks. Elon Musk, CEO and chief product architect of Tesla Motors explained this distribution

strategy of Tesla in 2012; he said that, “franchise dealers have a conflict of interest between selling

Tesla’s vehicles and traditional gasoline-led cars, and it would be impossible for them to explain the

advantages of going electric without simultaneously undermining their traditional business” (Musk,

2012).

In an attempt to accelerate the expansion of Electric Vehicle charging grid and sales across all markets,

Tesla Motors has “open-sourced” their technology thus allowing other cars or electric manufacturers to

take advantage of Tesla’s advanced patented technology. However many journalists argue this strategy

as Tesla’s attempt to reduce its infrastructural costs in developing its supercharger network. (John-Paul

Rooney,2014) .

Tesla relies on word of mouth publicity, internet awareness, trade shows, and Elon Musk's public

appearances for its product promotion

Tesla’s Global Foot-Print

United States & Canada

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Tesla Motor’s has its headquarters located in Palo Alto, California. Tesla opened its first distribution

outlet in Los Angeles, California and the second in Menlo Park, California in April & July 2008

respectively. (Teslamotors.com) . Later, in 2009 Tesla Motor’s opened their showrooms in New York

and Seattle. Currently the company has showrooms in Washington D.C., New York City, Chicago, Florida,

Colorado, Orange county, San Jose and Denver.

Tesla Motor’s opened its first store in Ontario, Canada on the 16th of November 2012. As of today Tesla

has one showroom Montreal as well as two in Toronto and Vancouver.

Reverse Globalization

Tesla Motor's decision to shift its assembly line from Norfolk, England showed a reversing trend in

globalization of multinationals. Tesla’s original plan was to source the heavy batteries from Thailand and

install them at the Lotus car assembly line and import the cars back to California for the American

market. Factors such as rising oil prices which made Tesla desirable to its consumers in the first place

became the weak link in its global supply-chain plans. Tesla now imports heavy batteries and assembles

its cars in California. Thus not only reducing their cost of production but also allowing them to give

better compensations to their workers in America. (source)

Europe

In June 2009 Tesla Motor’s entered Europe by inaugurating their first showroom in the Knightsbridge

district of London which was later relocated to Westfield, London in October 2013. Currently Tesla has

approximately 24 operating showrooms spread across Europe. The European headquarters is located in

Amsterdam, Netherlands. Tesla created a 62,000 sq. ft. Facility in Tilburg, Netherland in 2013.

Asia & Australia

Tesla Motor’s ventured into the Asian and Australian markets in 2010 by opening stores in Aoyama,

Japan and Sydney, Australia. The opening of the Aoyama showroom was followed by the opening of the

showroom in Osaka, Japan. (source)

Tesla opened its first showroom in Hong Kong in 2011, which also has a design-studio where customers

have an option to customize their Tesla Cars. Between 2010 and 2011 Tesla had an operational

showroom in Singapore, after which they discontinued their services in Singapore due to heavy taxation

imposed by the government on imported cars.

Mode of Entry

Strategic- Alliance

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Initially Tesla entered into a strategic alliance for its European market with Lotus. Tesla Motors used the

facilities of Lotus cars for assembling its Roadster model. There were discussions to end this alliance

with Lotus cars, but an increase in demand for Tesla cars has made them increase their agreed order of

2,400 units by a 100 units.(Silicon Valley Business Journal, Lotus to supply more Tesla Roadster bodies,

June 17,2011,Lisa Sibley). Tesla is looking to develop alliances with SARIO (Slovak agency for

development of investments and trade) to build additional plants in Europe.

Greenfield

Tesla Motor’s developed a 62,000 sq.ft. European distribution center and final assembly facility in

Tilburg, Netherlands in 2013. It uses Tilburg as the point of distribution for its entire European market.

For its Canadian, Asian and Australian market, Tesla relies on the exports from its Lathrop based

facilities.

(USA today,Tesla Delivers first cars in China plans expansion,April 22,2014,Joe Mcdonald)

Internationalization

Although there are a number of theories to analyze, the study and process by which a company

increases its involvement in international markets, we have focused on Linder’s Hypothesis (Trade

Theory) and the Uppsala Model (Traditional Approach) for Tesla Motor’s process of internationalization.

Linder’s Hypothesis

As the name suggests Linder’s hypothesis was proposed by Staffan Burenstam Linder in the year 1961.

His hypothesis basis itself in the fact that nations with similar demand structure trade with one another.

Analysis of Tesla’s Market using the above theory:-

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Figure 1. Linder’s Hypothesis

Figure 1 above shows comparative heat mapping between EV demand and EV supply. From the figure

above (on the right) we noticed that the EV demand in USA, which is where Tesla Motor’s based is very

close to most of its major global markets such as Netherland, Denmark, Portugal. Majority of the nations

in which Tesla cars have a good demand lie between 1.5 - 2.5 on the demand side. (source)

Figure 2. The number of persons represents EV demand

The figure shows the number of individuals (out of 5) in different countries willing to buy an electric

vehicle. We observed that in the USA, 3 out of 5 individuals would be open to buy an electric vehicle, in

the Netherlands, 3 out 5 also would be open to buying an electric vehicle, which could have been one of

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the reasons that Tesla Motor’s decided to open up their distribution and final assembly facility in

Tilburg, Netherland.

Thus, from the above figures and observations we can state that Tesla Motor’s internationalization

process follows the Linder's Hypothesis of Internationalization.

Uppsala Model

The Uppsala model basis itself on the assumption that nations with least Psychic distance are more likely

to trade. It states that a company first develops a strong hold in its own country and then moves on to

trading in nations which are geographically and/or culturally similar to their base country. Only after

entering and gaining experience in a psychically closer country do they tend to enter into countries

which are geographically and/or culturally very different from their base country. (Source)

Since we needed to examine the cross-cultural dimension for Uppsala Model we took the help of

Hofstede's cultural dimension theory and applied the same to each nation where Tesla Motors operates,

in order to understand their internationalization process.

Figure 3-4. Hofstede’s Cultural Dimensions

The above two figures are based on the Hofstede's cultural dimensions. From these figures, we can

analyze the psychic distance between the USA-UK-GERMANY-CHINA-JAPAN. After gaining experience in

the USA, Tesla Motor’s first step to increase its international presence was to enter the United Kingdom

in 2009. Figure 3 clearly shows the similarities across various hofstede dimensions. Whereas figure 4

shows that there is a substantial psychic distance between USA and Japan which it entered in 2010.

Figure 4 also shows that there is a huge psychic distance between USA and China which it only entered

in 2011 when it opened its first store in Hong-Kong.

Thus, by analyzing the psychic distance between countries that Tesla is operating in and the year in

which it entered each country's market, we come to the conclusion that Tesla followed the Uppsala

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model for its internationalization as it entered UK a country culturally very close to the USA and then

gradually moved onto other nations which are rather culturally distant from the USA.

Analysis of Potential MarketsSeveral considerations were taken into account while deciding what the potential markets for Tesla

international expansion were. Among the key aspects determining attractiveness of the market are

government support of EV usage and sales, existence of charging systems for electric cars, high prices

for fuel (countries with higher prices have higher tendency of switching to EVs), income level and

technology advancement. By considering all these factors, three potential countries were determined;

Ireland, Finland and South Korea. Detailed analysis of each of aforementioned market is presented in

the following sections.

Ireland(Written by Alexander Solms-Baruth)

The Republic of Ireland is an ambitious young marketplace for electric vehicles. The current marketplace

for electric vehicles sits just below 100 units sold per year (Shahan, 2014). The Irish government is

heavily investing in the goal of making 10% of the country’s transportation fleet into electronic vehicles

by 2020. In 2020, 10% of the Irish transportation fleet will be an estimated 230,000 electric vehicles

(ieahev.org). In order to support the transition to electric vehicles the Irish Government approved

federal grants between 2,500-5,000 Euros for every citizen that purchases an EV, in addition to waving

vehicle registration tax (ieahev.org). In 2012, the Charge Point Infrastructure Program went into effect,

which created 1,500 new street charging ports as well as made electronic vehicle parking available

throughout Ireland’s urban areas (ieahev.org). The driving forces of the transition to electric vehicles will

be described more thoroughly in the following sub paragraphs.

Setting the stage for Electric Vehicles in Ireland

The Electric Vehicle industry in Ireland has been slow to develop in recent years due to the financial

crisis that affected the global banking industry in 2008. The Irish economy is slowly moving out of a state

of recovery. The country is taking advantage of its young technically educated workforce to create a

manufacturing economy. As of now, the Irish economy exports more than 282 Million Euros worth of

automobiles into the rest of the EU (Ieahev.org). The automobile manufacturing is comprised of over 30

enterprises. Despite exporting a large amount of automobiles into the EU, as of 2013 Ireland had the

fewest registered electronic vehicles in the European Union (Shahan, 2014). Although, from 2013 to

2014, the sales of electric cars saw an increase of 412%.

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Regulations

The growth of the EV market in Ireland is driven by political policies mandated by both the EU and the

Irish government. The Irish government is following the EU Renewable Energy Supply Target (RES-T)

legislation that requires 10% of transportation fuels must be renewable in 2020 (ieahev.org). In

response, the Irish government has provided incentives for individuals to purchase electric vehicles. As

mentioned above individuals that purchase electric vehicles will receive funding as well as relief from

vehicle registration tax. In addition to funding, companies that purchase electric vehicles enjoy

additional benefits such as accelerated capital allowances and tax incentives.

Target market

The ideal target market for Tesla will be to reach the 2 Million people that live within 100 km of Dublin.

In the past Tesla has had the most success in metropolitan areas that offer short distances between

charge stations. The average income of Dublin Ireland is roughly 44,000 euros per year. With a relatively

low cost of living, high wages, and high petrol prices of 1.48, Tesla’s high-end electric vehicle can be well

placed in the market (numbeo.com, 2014).

The characteristics of the traditional target market for Tesla vehicles are early adaptor males in the 26-

32 year old age group (Tesla Marketing Plan, 2015). This target market can be found in metropolitan

cities in Ireland such as Dublin or Cork. The current charging infrastructure allows these users to easily

travel to and from the major cities in Ireland (Autotrade.ie. 2015). Ireland is one of the world’s largest

producers of wind power and strives to create a sustainable infrastructure that is not dependent on oil.

Competitive analysis

The current Irish EV marketplace is led by the Nissan Leaf. The leaf has just over 7,000 sales in Europe. In

Ireland alone the Leaf’s sales have increased 338% from 2013-2014. In the premium space both the

Renault’s Zoe and the BMW’s i3 has entered the market place. As of now, the i3 has sold just under 17

units but is establishing it’s self in the luxury market place. (Briscoe, 2014)

Ireland is developing a strong marketplace for EV. The country recently met 39% of its electricity

demands through the use of wind power (Tesla Motors, 2015). In other European marketplaces a variety

of EV are offered. The Nissan Leaf is the bestselling EV in the EU however in the luxury segment of the

market the major luxury brands are creating models that will compete with Tesla.

Window of opportunity

Ireland is an ideal marketplace for the production and sales of Tesla vehicles. The country in itself has a

modern highway infrastructure. The physical landmass is ideal for electric vehicles, as it is only

comprised on 96,036 sq km of highway (cia.gov/factbook). 40% of the 4,832,765 people live within 100

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KM of the capital city of Dublin. This means that the 300-mile limit per charge of a Tesla vehicle will not

have a major negative impact on buyer preference

As of 2014, Ireland registered roughly 96,000 new cars. 12% of that market place is composed of Luxury

brands with high unit price. The Irish government in 2012 started offering grants for individuals that

purchased electronic vehicles. The government wants 10% of the nation’s transportation fleet to be

electric by 2020. This is an estimated 200,000 electric vehicles. If 12% of those vehicles are luxury brands

then that is a potential of 24,000 that meet the Tesla market criteria.

Tesla must act now to find a position in the marketplace as a high-end electric vehicle. As of now, the

majority electric vehicles sold are the Nissan Leaf showing that the Luxury electric marketplace is under

developed

The best entrance strategy for Tesla is to use its current operation in London England to import units

into the Irish market. This can be done with minimal cost, as the freight from London to the target

market of Dublin is negligible. Tesla can grow its awareness in the market by properly advertising in

Dublin and the surrounding cities. Irish purchases can use the service stations in London for necessary

repairs.

Finland (Written by Evgeniia Sergeeva)

Nowadays, Finland is continuing its advancement in the electric vehicle industry in order to position

themselves among the leading European countries in terms of EV usage. Therefore, it has already

implemented several initiatives aiming at supporting its ambitious goal of reaching 66000 electric

vehicle sold by 2020 and up to 480000 units by 2025 as well as setting up 3500 charging point by the end

of 2020 (EEO Finland Report). Rising environmental culture in this peripheral part of Europe combined

with county’s willingness and readiness to accept new technologies are viewed as ultimate motivators

for entering Finnish market with a new electric vehicle. More detailed analysis of Finland’s EV market as

well as country’s potential in terms of buying power are provided in the following subchapters.

EV industry in Finland

Historically, Finland was considered more of a bystander when the growth and development of electric

transportation emerged in 1990s (Jacobides et al., 2013). While its neighbor countries in the Nordic

region as well as other European countries have taken risks to be early adapters of a new technology

and applied various initiatives to increase awareness and usage of electric cars, Finland’s attitude

towards EV potential has been more discreet (Tikkanen&Ornberg, 2012, 11). Nevertheless, electric cars

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have finally captured its share in Finnish market and nowadays there is a rising trend towards electric

car usage in the country, especially in the metropolitan area. According to statistical data, 960 new

electric cars have been registered by the end of 2014, which is almost twice as many as the previous

year’s results of 440 vehicles. It is noteworthy that share of fully electric cars experiences rapid growth

in Finnish EV sector (Sahkoinen liikenne, 2015). Even though, in 100% Electric car sales ranking for

European region Finland was listed only 17th in 2013, taking into account the pace with which electric

vehicles consumption is growing, it can be assumed that soon enough Finland will earn its place among

the largest potential EV markets in Europe (Shahan, 2014).

Regulations

In order to support EV market growing potential, between 2011 and 2015 Finland has invested 100

million euros to Electric Vehicle Systems program (EVE), which aims at establishing a high quality

development environment. As results of this initiative, electric traffic infrastructure has been developed,

charging networks have been largely extended as well as number of EVs have increased significantly

with the help of investment support from Ministry (Antikainen, 2014). Finnish Ministry of Transport and

Communications has also planed to implement a nation-wide electric car charging network by 2016 in

order to increase electric traffic in the country (Korvenoja, 2014). Currently, Finnish authorities provide

financial support in terms of co-funding of 30% of purchase of EV. Moreover, in 2015 Finnish Ministry of

Transport plans to start implementing so-called “Dutch model” of EV market development, which

implies total tax exclusion for models of cars with zero emission index. This initiative can significantly

increase demand for EVs in the near future (Sähköinen Liikenne, 2015). However, in order to reach its

targets in climate policy, Finland also invests heavily in production of biofuel as substitutes for fossil

fuels as well as implementing tax benefits for usage of alternative fuels (Klitkou et al., 2014). This can be

viewed as a potential barrier for entrance, since eco-concerned Finnish people can choose to use

nationally produced biofuel instead of changing completely to Electric Vehilces.

Target market

Since Finland has started to develop its EV market quite recently, most of Finnish users of electric cars

can be considered as “the innovators” who have interest in new technologies and will be the first ones

to consume new devices and ideas. According to a study made in Birmingham, which was supported by

studies made in Norway and Finland, this type of consumers of EV usually already have at least two cars,

drive car daily to work and live in individual or semi-detached house. These people usually belong to an

age group of 25-59 years old, they have higher university education, occupy managerial and professional

positions and therefore have high income and high socio-economic status. What is more, such

consumers tend to be environmentally and technologically conscious (Tikkanen&Örnberg, 2012).

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Competitive analysis

Currently, Nissan Leaf is considered to be EV market leader in Finland, followed by Volkswagen E-Up,

and Ford Focus Electric with a minor share of the EV marketplace. However, even though Tesla does not

have official presence in Finland (even in terms of certified dealers), 94 Tesla Model S cars were

registered in Finland in 2014 (Sähköinen Liikenne, 2015). This shows growing demand for this electric

vehicle, since Finnish people imported this model themselves from the nearest European countries,

where Tesla is already present. In terms of luxury electric vehicle niche, potential rival can be Fisker EV,

which production plant is located in Finland. However, currently Fisker faces serious financial problems

and struggles to raise additional funds for its car production. Even though currently luxury EV

competition for Tesla in Finland is quite weak, it can rise in the future as two Finnish companies,

Toroidion and Scarlet Motors, recently announced ambitious plans of developing electric supercars

(Good News from Finland, 2015).

Window for opportunity

In the case of Tesla, there are several reasons why it should enter Finnish EV market as soon as possible.

First of all, as it was mentioned before, Finnish government strongly supports the development of the

electric vehicle market and therefore it is going to reduce taxation of entirely electric cars and build

nation-wide charging network. Therefore, the major entry barrier of high import taxes that Tesla has

faced before is going to be eliminated. New governmental policy can drive the demand for EV

consumption and since there is a low competition in luxury niche of electric vehicle market in Finland,

Tesla can increase its market share in a short period and become a market leader in the sector before

other potential and existing competitors can influence customer demand.

South Korea(Written by Tian Qin)

As a developed Asian country, the GDP of South Korea is 1.305 trillion dollar, and its population is 50

million people. Based on these figures, South Korea is regarded as a high income country (World Bank,

2013). South Korea has its own market of electronic vehicles, with the full support from the South

Korean government, the country is targeting to produce 1.2 million units of environment-friendly

vehicles in 2015 (Ibtimes, 2010). Korea has leading positions in lithium battery technologies through LG

Chem and SK Energy with a global market share of over 20% of next generation battery, and the Korean

government has plans to replace up to 10% of the nation’s passenger vehicles with EVs by 2015, and

20% by 2020 and also set a goal of becoming the world's fourth largest EV market by 2015 (Tekes, 2010).

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EV industry in South Korea

For the electronic vehicle industry, South Korea already has a rich experience; Hybrid cars are already

commercialized and are the most actively developed type of ‟electric cars‟ in Korea. The market size of

local hybrid vehicles is about 70,000 units in 2010 (Tekes, 2010). Furthermore, full deploy of EV market

can be realized faster depending on government’s policies and supports on charging infrastructure and

standardization of charging technologies which are keys for EV market growth, meanwhile, South

Korea’s EV industry is asking the government for an early establishment of charging infrastructure while

calling for reduced power rates and car grants to encourage the purchase of EVs (Tekes, 2010).

Regulations

South Korean government has a series of rules and regulations to help the growth of domestic EV

markets and the production of electronic vehicles; the government established the EV market centered

on the public sector, and provided purchase subsidies, charger installation support, and fostered eight

EV preferential promotion cities, which have received special support for EV charging infrastructure and

related initiatives, and it has been systematizing private sector promotion support which includes

various tax benefits (consumption tax, sales and registration tax, a two-year reduction in tollgate fees

that are assessed on vehicle purchases, etc.), bonus support depending on greenhouse gas (GHG)

emissions, and the provision of incentives for EVs such as discounts on congestion fees, reduced

highway tolls, and parking spaces exclusive to electronic vehicles. Also, South Korean government focus

is on popularize EVs by diversifying the vehicle types, expanding the private market, and foster the

industry-supported creation of an EV charging service market where EV charging is offered as part of a

package with car sharing and gas station services (Ieahev, 2013). Last but not least, the U.S.-Korea Free

Trade Agreement offers a huge benefit, and could also be considered as a new opportunities for U.S

exporters (Ustr.gov, 2012).

Target market

Take the effective range of normal electronic vehicle into consideration, the most suitable consumers

majorly comes from urban and suburban area, these kinds of commuters have a rather short range of

daily commute, and those who owns a private residence would be much better since they have an

independent parking space for their vehicles. Take the price of Tesla model into consideration, people

with potential purchase ability would mainly come from middle class or upper middle class, and let’s

also take cultural elements into consideration, since people in south Korea has a strong tendency in

supporting domestic products, Tesla’s potential customers should be able to accept an electric luxury

car from foreign country.

Competitive analysis

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South Korea’s electric vehicle market has been developing for years, the major players in this market

are: Hyundai, Daewoo, and Kia, the “green car” concept innovator. These three manufacturer‘s major

products are family-use or business-use type ( compact car or compact mid-sized ) , which leaves a

huge market opportunity for electric luxury vehicles. It is also worth mentioned that consumers in South

Korea have a strong tendency for purchasing domestic products (due to its price advantage and tax

bonus), South Korea is on track to spend more on vehicle imports from Europe this year than it earns

from exports the other way, for the first time in 24 years, as German brands breach the once

impregnable fortress of Hyundai Motor and its local rivals (REUTERS, 2014). This also indicates that

South Korea has a growing interest in foreign vehicles, especially in foreign luxury car.

Window for opportunity

In regards to the timing of entering the South Korean market, I suggest delaying market entrance for 5

years. One reason is that this time period could leave a space for Tesla to observe thoroughly the market

environment in South Korea, second, until 2020 the benefit of south Korean government ‘s policy would

finally be realized, along with more tax discount from USSK Free trade agreement as time goes by. I also

prefer a long term market-entering strategy, Tesla has proven itself several times before with its own

ability of adapting to new markets. Korea however has major competitors to consider, to let potential

consumers accept the concept of “luxury electronic vehicles” could be crucial. This will require in depth

market research , and also consumer experience centers which will be set up in the major cities, after

all, seeing is believing.

Prioritization and RecommendationsBased on the analysis of aforementioned countries, prioritization decisions as well as final

recommendations were developed. First, we suggest that Tesla should expand its operations into

Ireland. The Irish market is actively developing in terms of EV consumption and driving distances in this

country are perfect for Tesla vehicles. The Irish people, especially in the area of Dublin, have high

income and there is a trend towards luxury cars. Overall, these are all conditions in the market that is

suitable for the expansion of Tesla. Our suggestion for Tesla is to start heavily marketing it’s vehicles in

the Dublin area, since most of the potential customers of Tesla cars live there.

The Second potential market for Tesla is Finland. The Finnish market has great potential in terms of EV

sales. However, it is best to wait until the government starts to implement its initiatives like tax relief

for fully electric cars as well as the full implementation of charging stations around the country.

However, in order to have a first mover advantage and win market share by associating Tesla with the

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best EV in luxury segment, we suggest Tesla enters the market as soon as possible by selling its cars

through authorized dealers to supply early adopters with Tesla vehicles.

The third country in the list is Korea, since entering this market requires prior preparation in order to

familiarize oneself with this market. It can probably be needed to set up strategic market campaign in

order to promote a concept of luxury EV. It is also important to understand market preferences when it

comes to EV brands in Korea, since the Korean population tends to be loyal to its local brands.

In conclusion, we would like to mention that we see a great potential in all three mentioned markets

and believe that Tesla can not only generate large sales volumes but that these countries will also

change people’s perception of electric cars by showing superior experience of driving a fully electric

Tesla vehicle.

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