Strategy and Innovation in Electric Vehicle Sector: A Comparative Analysis based on the Cases of Tesla Motors and BYD Auto

Abstract This dissertation consists in a qualitative, historical-narrative analysis related to the topic of Electric Vehicles (EVs). In particular, the work is centred around two exemplary case studies within the electric automotive sector: Tesla Motors and BYD Auto. The aim of this research is to understand, based on these examples, which strategies could be adopted to successfully commercialize innovations, EVs in particular, that cause some disruptive effects: Which product/market strategies could be associated with an increased likelihood of success and how do these strategies evolve over time? Also, this thesis investigates which is the role of “Context of Origin”, when it comes to EVs success and development, and how did two new entrants managed to become global leaders within very few years. To address these questions, this thesis reconstructed the history, strategy and development of both Tesla and BYD, along with a detailed analysis of their production and sales data accessed through MarkLines database. The thesis starts by defining what “Radical” innovation is: which are the features, the consequences they bring on supply-side, demand-side and competition and which strategies are usually implemented to commercialize them, based on the literature. The first part is aimed at providing a general theoretical framework, also introducing some fundamental concepts like the one of “Ecosystems” and “Technological Discontinuity”. Next, a specific analysis on EV innovation is carried out. First, a brief part on history, benefits and relevance of this innovation is outlined, followed by a detailed examination of strategy aspects related to EVs commercialization, including barriers, incentives and early adopters of this technology. This exploration brought to the surface some gaps in the literature, represented by the research questions above. Hence, this work tried to fill these gaps based on BYD and Tesla evidence and their comparison. The Results and Findings highlight that each company has been able to achieve today’s position and success thanks to a synergy of elements. Tesla began its activity as an EVs startup founded in Silicon Valley. The company has been able to prosper largely thanks to the private fundings and investments it was able to acquire, starting from the ones provided by Elon Musk himself back in 2006. BYD, quite differently, started its life as a battery producer, expanding onto car marking by leveraging these competencies. The Chinese company, differently from Tesla, evolved and developed thanks to massive public government support and favourable internal economic conditions. Although it is quite difficult to identify a unique successful strategy, which really depends on present conditions, company’s features, products and objectives, this dissertation tries to generalize some useful strategy directions, based on Tesla and BYD experience. Having a clear initial target, and gradually expanding it over time, is fundamental to enter the market and subsequently acquire enough resources, thanks to the enlarged customer base. The offering breadth for these innovations should be initially very focused, to then expand and diversify over time. Being vertically integrated is found to be essential to succeed in this industry and an international market expansion, being it premature of belated, is absolutely required to become a global player. Anyhow, success can only be achieved through a supportive ecosystem made out of suppliers, customers, infrastructures and institutions. The cardinal role that Governments and policymakers (and the wider Context of Origin) can have in facilitating EVs diffusion clearly emerges from the study.