Tesla, Inc.: The Strategic Partnership for a New Gigafactory in China

In October 2018, Tesla, Inc. (Tesla), an American automotive and energy company, received an approval from Shanghai’s mayor to acquire a plot of land to build a new electric-vehicle (EV) factory, which was expected to produce its first cars in three years, and to have initial capacity of about 250,000 vehicles a year. This move was in response to a significant rise in the Chinese EV market and the additional tariffs imposed by the Chinese government during its 2018 trade war with the United States. Since 2013, Tesla had partnered with Panasonic Corporation (Panasonic)—the consumer electronics company and a world leader in battery technology—to build Gigafactory 1 and Gigafactory 2 in the United States for manufacturing Tesla’s batteries. The Chinese automotive market was a business environment much different from any that the Tesla–Panasonic partnership had previously experienced. Given the Chinese government’s regulations, requirements, and incentives, what should be Tesla’s growth strategy in the world’s largest automotive market—China. Should Tesla continue its partnership with Panasonic in China or should it look to derive more potential benefits from other suppliers?

This case is intended for a senior undergraduate- or graduate-level course on competitive strategies, management of technological innovation, entrepreneurship, strategic alliances, mergers and acquisitions, or global business. After completing the case and answering the assignment questions, students will be able to<ul><li>identify and discuss competitive strategies of innovative start-up firms entering an established industry;</li><li>analyze and discuss competitive strategies of incumbent firms in an established industry when facing disruptive technologies;</li><li>analyze and discuss competitive strategies in emerging markets;</li><li>understand the formulation and management of international strategic partnerships;</li><li>identify and discuss key success factors in an industry that is characterized by network externalities; and</li><li>understand the impacts of international trade agreements and disagreements on a firm’s strategy and performance.</li></ul>

• strategic alliance, market entry, business model, entrepreneurship, startup, network effect, disruptive innovation, sustainability