288 Part 2: Strategic Actions: Strategy Formulation
Strategic Alliances as the Foundation for Tesla Motors’ Operations
Strategic Focus
Founded in 2003, Tesla Motors, the manufacturer of electric
vehicles, has formed many alliances as a means of competing
during the early years of its life. For example, the company cre-
ated a R&D partnership with Dana Holding Corporation initially
for the purpose of jointly designing and producing a system
capable of controlling the build-up of heat in its car batteries.
Overall, Tesla has partnered with many companies working
in the value chain that is used to produce its products. In this
sense, alliances have been formed with suppliers, R&D experts,
as well as original equipment manufacturers such as Daimler.
One of the projects on which Daimler and Tesla are collabo-
rating is the B-Class Electric Drive, an all-electric vehicle from
Mercedes-Benz. Other partnerships that have been formed
over the years include Tesla’s nonequity strategic alliance
with Sotira, a French company, and an equity alliance with
Panasonic, a Japanese-based firm. The purpose of the partner-
ship with Sotira is to manufacturer the carbon fiber bodies for
its cars, while battery cells for the Tesla battery pack are
produced through the collaboration with Panasonic.
Interestingly, its on-going work with batteries and recent
hints from founder and CEO Elon Musk suggest that Tesla may,
at is core, become a battery company rather than an auto-
mobile manufacturer. Appearing to support this possibility
were comments indicating that Tesla intends to make and sell
mega-batteries for homes and electric utility companies. The
firm’s decision to build and operate a 10-million-square-foot
facility (dubbed the Gigafactory) to build batteries seems to
reflect Tesla’s capacity to build an array of batteries with dif-
ferent functionalities. With an initial investment of $5 billion,
this factory was to be the largest lithium-ion-battery plant in
the world. One goal of the Gigafactory is to “make batteries so
cheap that electric cars can compete with conventional gaso-
line engines.” Interestingly, the Gigafactory’s size and scale allow
Tesla to produce a quantity of batteries exceeding the firm’s
needs for its cars. In turn, analysts suggested that the company
may seek additional partnerships as a way of continuing to
develop innovative batteries and to sell some of the outputs
from its plant.
In early 2015, Apple announced an internal project that was
aimed at developing an Apple-branded electric vehicle. With a
code-name “Titan,” the initial work was oriented to designing a
vehicle that resembles a minivan. Early assessments were that
Apple intended to compete directly against Tesla if it decided
to enter the electric vehicle market space. At the same time,
the seriousness with which Apple is approaching this initial
design work is unknown, especially given the company’s pat-
tern of going so far as developing product prototypes before
deciding to abandon a potential innovation. Additionally, the
complexity of designing and producing an electric vehicle is
such that several years would be required for Apple to intro-
duce its product to the market, even if it chose to do so. Still,
Apple’s large investable assets and its innovative successes
suggest that Tesla executives would be well served to carefully
observe the firm’s progress with respect to the Titan project.Other recent speculation regarding Tesla and Apple cen-
tered on the possibility of Apple acquiring Tesla, at a rumored
cost of roughly $75 billion. In contrast, some analysts were
suggesting that “some sort of joint venture or collaboration
remains the smartest bet for both companies” (Apple and Tesla).
As Tesla looks to its future, might the possibility of collaborating
with another innovative firm, but one with significant financial
resources, be a viable option? And from a broad perspective,
might “a collaboration between the two tech giants, each with
enormous clout and credibility, go a long way to converting
the electric car from niche curiosity to mass consumer good?”
Sources: K. Finley, 2015, Tesla isn’t an automaker. It’s a battery company, Wired,
http://www.wired.com, April 22; N. Gordon-Bloomfield, Move over Tesla: LG Chem
now largest manufacturer of electric car battery packs thanks to Daimler deal,
Transport Evolved, http://www.transportevolved.com, April 2; T. Lee, 2015, Apple,
Tesla alliance still makes most sense for electric car, San Francisco Chronicle
Online, http://www.sfchronicle.com, February 17; D. Wakabayashi & M. Ramsey, 2015,
Apple gears up to challenge Tesla in electric cars, Wall Street Journal Online,
http://www.wsj.com, February 13; C. Trudell & A. Ohnsman, 2014, Why the Tesla-
Toyota partnership short-circuited, Bloomberg News Online, http://www.bloomberg.
com, August. 7.Doug Cheeseman/Getty Images
Shown here is a Telsa Roadster and the electric
battery pack that powers the car.