Category winner: Tesla’s Entry into the US Auto Industry

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This case won the Free Case category at The Case Centre Awards and Competitions 2021. #CaseAwards2021

 
The case

teslaWho – the protagonist

Elon Musk, Tesla CEO.

What

Founded by the controversial Elon Musk, Tesla has disrupted the traditional automobile industry with its range of electric vehicles.

Why

It appeared Musk had bitten off more than he could chew when it came to the production of the Model 3.

A white teslaTesla was running out of cash and was nowhere near its production target of 5,000 units a week – the number needed to reach profitability. Tesla did achieve that target eventually but the original production goal was missed by six months.

Where?

As of 2016, the new passenger car market in the United States was worth around a staggering $270 billion at the retail level.

Tesla only accounted for a 0.2% market share of the US car industry, but it was nevertheless an extremely lucrative market to tap into.

When?

It was May 2018 when the pressure was being ramped up on Musk, as analysts were questioning the company’s capital requirements.

TeslaKey quote

“Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.” – Musk remarked on Twitter.

What next?

Investors and auto industry experts were split on Tesla’s future. Would they continue to disrupt the industry and achieve its mission to accelerate the world’s transition to sustainable energy, or face bankruptcy?

 
Instructor viewpoint

Discover how this case works in the classroom.

Nara Jeong“As a strategy professor, there are many reasons to like teaching with Tesla's Entry into the US Auto Industry case.

“This case is very relevant to strategic management courses such as external and internal environment analysis and business-level strategy. The case deals with the automobile industry overview, changes in trend, and Tesla’s strategy and issues.

“I usually use this case in my external environment analysis session. Students are asked to apply Porter’s 5 forces framework and find opportunities and threats in the industry.

“Students are familiar with this company and the industry, and most of all they are excited about this timely topic. It is fun to teach in class as students enjoy reading and discussing this case.”

Nara Jeong, Assistant Professor of Strategy at San Francisco State University.

The authors

author

Don Sull and Cate Reavis

This is Don and Cate’s first Case Award and the second for MIT Sloan School of Management - their previous success coming in the Outstanding New Writer Case Competition in 2012.

Redefining the automobile market

Don said: “We’re very happy that this case is getting attention. Tesla is redefining the automobile market and how we think about cars.

Climate change"At a time when the climate is in a state of crisis, it is imperative that changes occur in how we move from point A to B. We wrote this case to highlight how Elon Musk has approached the climate crisis and his determination to change automobile transportation as we know it.”

Identifying with students

Cate commented: “As a company, Tesla is very popular with students due to its attempt to disrupt the US auto industry with all-electric vehicles that many believe will soon displace internal combustion engines. With the release of its more affordable Model 3, the company is even more appealing because students can realistically envision themselves being a customer.

“The case provokes considerable debate due to Elon Musk’s visionary, futuristic, and, at times, erratic style of management. Is he the right person to lead Tesla at this point in time?

“Students also debate the company’s burn rate. Typically, half of the students believe that within five years Tesla will go bankrupt or be acquired, while the other half believe that it will continue to exist as a standalone company.”

Arrows on an archery boardImportance of accurate sources

Don added: “Writing a case from published sources is always challenging as you never know how accurate the sources are that you use to build the narrative.

“This case was particularly challenging in describing the current status of the US auto industry amidst increasing consumer demand for electric vehicles, the eventual emergence of driverless vehicles, and shifting perceptions on what mobility will look like in 15 years.”

Intriguing narrative

Cate concluded: “A good case should always be built around an intriguing narrative. It should be as objective as possible in order to allow students to form their own opinions on the challenges or decisions the case presents. What the protagonist/company/organisation should do (or should have done) should never be obvious. In the classroom, a good case invites a spirited dialogue among students.”

About the authors

Don Sull is a Senior Lecturer at MIT Sloan School of Management.
e dsull@mit.edu

Cate Reavis is Associate Director, Curriculum Development at MIT Sloan School of Management.
reavis@mit.edu

 
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Tesla’s Entry into the US Auto Industry
Ref 18-188

Supplementary software
Ref 18-188S

 

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