AP Research Sample Paper for a Case Study
Writing a case study paper for the AP Research capstone course requires presenting an in-depth analysis of a real-world issue, topic, or case. In this paper, I will analyze the case of Tesla Motors and their effort to disrupt the traditional automobile industry. Through this case study analysis, I will explore how established companies can respond to disruptive innovation and new entrants that threaten to displace existing market leaders.
Tesla Motors was founded in 2003 by Martin Eberhard and Marc Tarpenning with the goal of producing affordable, mass-market electric vehicles. The founders recognized the technical and economic limitations of battery-only electric vehicles at the time but believed battery and powertrain technology would advance sufficiently within a decade to enable such a vehicle. In 2004, Tesla launched its first production vehicle, the Tesla Roadster sports car, as a low-volume, high-price proof of concept for its electric powertrain technology. The Roadster served as a technology demonstration vehicle while providing early revenue and manufacturing experience for the nascent company.
The real disruption started in 2012 when Tesla began producing its Model S premium sedan, priced starting at around $70,000. Unlike other electric vehicles at the time which were small, limited-purpose cars, the Model S competed directly with luxury cars from established automakers like Mercedes-Benz, BMW, and Audi on performance while also offering better fuel-efficiency and lower operating costs. In reviews, the Model S received praise for its acceleration, handling, features, and styling that matched or beat gasoline competitors. Within a few years, it became the best-selling plug-in car in history with over 250,000 units delivered globally by early 2020.
The success of the Model S put Tesla on the map as a legitimate automaker capable of challenging industry leaders on their home turf. Traditional automakers initially struggled to view Tesla as a serious threat due to its low volumes and focus on the high-price luxury segment where sales volumes are smaller. This allowed Tesla time to learn, improve its technology, manufacturing capabilities, and brand while establishing a devoted fan base of early adopters for its next ambitious vehicle—the Model 3.
In March 2016, Tesla began taking $1,000 refundable deposits for the Model 3, its first truly affordable, mass-market electric car to be priced starting at just $35,000. Again breaking with industry convention, Musk aimed to sell the Model 3 direct-to-consumers online without traditional dealerships. Over the next two years, Tesla ramped up production of the Model 3 while facing many challenges of scaling output and addressing quality issues common to new vehicle programs.
By mid-2018, the company was manufacturing over 5,000 Model 3 vehicles per week and fulfilling a backlog of over 450,000 net reservations for the car, worth an estimated $14 billion in future sales. With the Model 3, Tesla had achieved its goal of producing an electric car that directly competed with mainstream gasoline sedans from Toyota, Honda, and others in terms of price as well as features and performance. The Model 3 became the best-selling premium sedan in the US and brought Tesla’s total global sales to over 245,000 vehicles in 2018, making it the largest US automaker by sales that year.
While experiencing phenomenal demand for its new Model 3, Tesla also began actively working toward developing a $35,000 Model 3 Standard Range variant and crossover SUV along with expanding Gigafactory battery and vehicle assembly plants. These ambitious plans required addressing the challenges of ramping up production, improving manufacturing technologies, and controlling costs on new vehicle platforms—all while facing increasing competition from arrival of new long-range electric vehicles from established automakers facing their own disruption.
By 2019, key competitors like Jaguar, Audi, and Ford began launching new long-range electric cars with ranges greater than 200 miles like the Jaguar I-Pace, Audi E-tron, and Ford Mustang Mach-E. These early forays showed mainstream automakers had started taking Tesla’s market threat more seriously. General Motors and others outlined intentions to invest tens of billions in electrification and announced goals of offering over 20 new electric models globally by 2023, applying their scale and resources to aggressively expand in EVs.
As newer competitors emerged, Tesla also faced more scrutiny over its production and delivery capabilities as well as concerns about demand and pricing once tax credits phased out in markets like the US. These factors pressured Tesla’s financial position as exponentially growing production volumes required heavy capital investments and fixed costs. In early 2019, as Model 3 demand weakened and profit remained elusive despite record deliveries, Tesla faced questions about its ability to truly disrupt the entrenched automotive industry. The pandemic and its economic effects in 2020 further exacerbated these growing challenges.
Tesla had some important advantages. It established itself as an iconic brand for EVs with very loyal customers and nearly one million vehicle deliveries by early 2022. This provided valuable data to refine models and manufacturing processes as well as a dedicated customer base to leverage for new vehicle rollouts. While traditional automakers appeared to be rapidly scaling up EVs, their lineups were still early stage and focused on electrified versions of existing nameplates rather than all-new dedicated platforms. Most automakers also continued to generate the majority of profits from internal combustion engine (ICE) vehicles and faced the complex transition from century-old business and operational models built around gasoline propulsion.
Tesla aimed to make the transition directly to sustainable transport and renewable energy generation/storage through continuous advancement of its proprietary technologies for EVs and battery packs. Despite concerns in 2019, its vehicle sales rebounded and new factories in Berlin and Austin came online by late 2022, positioning Tesla for even greater scale. The consistent successes of the Model 3 and Model Y best-sellers demonstrated its ability to produce high-volume, profitable mainstream electric cars despite issues typical of a young automaker. While traditional automakers scaled rapidly in numbers of EV models, Tesla retained advantages in technology iterations, direct sales experience, and data/insights from millions of electric miles driven that it could leverage for new products like the Model Y crossover and Cybertruck pickup.
Established automakers still hold important advantages of scale, supply chains, existing facilities, brand recognition in core regions, and profits that allow major ongoing investments. But Tesla proved that a new company can successfully disrupt the auto industry with compelling electric vehicles, manufacturing improvements, and strategic positioning as both a mobility brand and renewable energy supplier. While General Motors, Volkswagen, Toyota, and others are scaling up to counter Tesla, there remain open questions about how quickly legacy automakers can transition their business models, capitalize on electrification opportunities, and overcome entrenched operational challenges versus a company solely focused on that transition.
Overall, Tesla’s rise and the active response from traditional automakers demonstrates that while incumbents hold substantial scale and resources, disruptive innovations by dedicated new entrants remain a serious threat. Through a focus on enabling technologies and strategic strengths versus existing products, a start-up can achieve a leadership position that compels even century-old companies into not only copying its offerings but also changing market perceptions and business models to counter future disruption. This case study provides important insights for managers across industries on how to both drive innovation and respond proactively when confronting new competitive threats to established markets and value chains. It also highlights the magnitude of transition challenges for global firms anchored in legacy systems versus more nimble newcomers pursuing industry transformation from the onset.
This analysis of Tesla and its ongoing disruption of the automobile industry demonstrates the key dynamics at play when new technologies and business models threaten to displace dominant market leaders. Through in-depth examination of this real-world case at a pivotal stage, insights emerge for companies facing disruption on strategies to either drive innovative change or counter emerging competitive threats. By grounding theoretical concepts in an evidence-based examination, this case study aims to provide valuable lessons for strategists, managers, and policymakers navigating industry disruption in the evolving global economy.
Andrew Stroud