Eco 201 Week 3 Case Study

ECO 201 Milestone Three

Costs of Production As I mentioned above, Tesla sets themselves apart from competitors by fueling the cost of their own supply to produce lithium-ion battery packs used to power their automobiles. In the second automobile, the Model S sedan that Tesla designed, developed and manufactured, more than forty percent of the total cost comes from the manufacturing of the battery pack used to power the luxury sedan. The rising variable cost of technology is why the newly activated Gigifactory is needed. The Gigafactory will be the production line in assembling the battery packs. The goal is to supply battery packs for mass production for models that have already been introduced, and to produce less expensive battery packs for future models. (Young, 2015) “The full activation of the Gigafactory carries existential significance for Tesla, representing a new sense of urgency at a company known for its unreachable deadlines.” (Randall, 2017) The new challenge that Tesla faces is producing a battery pack to the new Model 3 automobile. Ultimately, this model will be more cost efficient for consumers, proving to be about $30,000 cheaper than the Model S sedan. The

Even though there are competitors in the electric powered automotive market, no one else manufactures and supplies their own battery pack to power the vehicle. Tesla’s exclusive technology creates entry into the electrically powered luxury automotive market extremely difficult. The ease of entry categorizes Tesla as an Oligopoly market structure. As mentioned above, although there are other competitors inside the electric powered automotive industry, Tesla is the only one designing and manufacturing their own powertrain components for the cars to operate. Categorizing them with all other alternative fuel brands gives the company a “false picture of the market Tesla is trying to capture.” (Speculations,