Tesla Inc.: Accelerating Sustainable Profits

The release of Tesla Inc. (Tesla)’s financial results in early 2019 made it clear that significant challenges lay ahead for the firm. While Tesla remained the market leader for electric vehicles in the global automobile industry, sales had dropped dramatically, and Tesla was once again losing money. Its recent launch of the Model 3 held great promise and added a key vehicle to its growing product portfolio, but customer complaints about late delivery were on the rise. As a leader of electric vehicles in the global automobile industry, which capabilities are most important for Tesla to further develop, and how broadly should the firm stretch its supply chain and service network? Were changes to the firm’s strategy required in order to advance its mission to accelerate the world’s transition to clean energy?

The case sketches the path taken by Tesla that contributed to the problems it faced, outlines alternative strategies adopted by key competitors in electric vehicles, considers three broad aspects related to operations strategy, and encourages students to explore the connections between strategy and capabilities. It can be used in undergraduate- and graduate-level modules on operations strategy—with an introduction to multiple dimensions of operations strategy—or close that module, with a synthesis of how strategy might be aligned with capabilities. The case could also be used in a module on supply chain management, with the objective of exploring how strategy and capabilities must be aligned within and between manufacturing and supply chain management. After working through the case and the assignment questions, students will be able to do the following:<ul><li>Examine the evolving nature of Tesla’s operations strategy and implications for firm performance (including basic financial metrics related to operations).</li><li>Explore how the firm has developed a broader set of key operational capabilities, including increasing vertical integration and development of related service operations; expanded relationships through joint ventures; and changing supply management as the product life cycle evolves.</li><li>Debate where the greatest future opportunities to adjust or redirect the firm’s operations strategy might lie.</li><li>Explore what a more environmentally sustainable business model might look like for the auto industry with Tesla as a potential leader.</li></ul>

• strategy
• value chain
• supply chain
• operations strategy