This case explores the growth of Tesla Inc., and in particular, the role of government subsidies in the growth of the company’s electric cars sales. Tesla, which in addition to its electric cars is also involved in energy storage, lithium ion batteries and solar panel making, was founded in 2003. The Tesla Roadster rocketed Tesla into consumer consciousness in 2008. As the world’s first electric sports car, Tesla’s Roadster changed the way people perceived electric cars. Today, Tesla, which has assets of $25 billion and sales of more than $7 billion, employs more than 30,000 people. Today, more than 150,000 Tesla Model S vehicles have been sold. The Model S, a luxury sedan, is the world’s best-selling electric car after the Nissan Leaf. Tesla has gone on to introduce several other models including one with a base price of just $35,000. Electric cars sales have been particularly strong in Europe, where sales of electric cars have grown by 30 percent overall and, and as much as 80 percent in countries like Sweden where there is a move toward protecting the environment. Throughout most of its existence, Tesla has been the recipient of government subsidies and some analysts suggest that without these subsidies, Tesla’s vehicles are not be competitive. Indeed, following the phase out of subsidies in Denmark, a country that had been an important market for Tesla, sales dropped notably as consumers bought cheaper combustion engine vehicles rather than higher priced, non-subsidized Tesla vehicles despite the country’s general tendency toward environmentally friendly living. If other governments phase out their subsidies as well, Tesla could find itself in a difficult spot.    Should companies like Tesla rely on government subsidies in selling their cars because they are better for the environment than traditional cars based on the old technology of traditional combustion engines? Basically, should the environmental issues be built into the competitiveness of the car pricing of electrical cars, or should supply and demand be the driver of the electrical cars’ prices?

This case explores the growth of Tesla Inc., and in particular, the role of government subsidies in the growth of the company’s electric cars sales. Tesla, which in addition to its electric cars is also involved in energy storage, lithium ion batteries and solar panel making, was founded in 2003. The Tesla Roadster rocketed Tesla into consumer consciousness in 2008. As the world’s first electric sports car, Tesla’s Roadster changed the way people perceived electric cars. Today, Tesla, which has assets of $25 billion and sales of more than $7 billion, employs more than 30,000 people.

Today, more than 150,000 Tesla Model S vehicles have been sold. The Model S, a luxury sedan, is the world’s best-selling electric car after the Nissan Leaf. Tesla has gone on to introduce several other models including one with a base price of just $35,000. Electric cars sales have been particularly strong in Europe, where sales of electric cars have grown by 30 percent overall and, and as much as 80 percent in countries like Sweden where there is a move toward protecting the environment.

Throughout most of its existence, Tesla has been the recipient of government subsidies and some analysts suggest that without these subsidies, Tesla’s vehicles are not be competitive. Indeed, following the phase out of subsidies in Denmark, a country that had been an important market for Tesla, sales dropped notably as consumers bought cheaper combustion engine vehicles rather than higher priced, non-subsidized Tesla vehicles despite the country’s general tendency toward environmentally friendly living. If other governments phase out their subsidies as well, Tesla could find itself in a difficult spot.   

Should companies like Tesla rely on government subsidies in selling their cars because they are better for the environment than traditional cars based on the old technology of traditional combustion engines? Basically, should the environmental issues be built into the competitiveness of the car pricing of electrical cars, or should supply and demand be the driver of the electrical cars’ prices?