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Why Tesla is So Successful – Tesla Strategy Analysis

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The automobile industry has been flourishing since the patent of Benz Patent Motorwagen by inventor Karl Benz back in the year 1886, followed by the first mass-produced car, the Model T in 1908. The automobile history has seen so many iterations of our beloved cars, uncountable trends, unimaginable advancements, unmatched performances, unconditional love and passion. The cars hold an emotional value. Owners choose a car to which they can connect. From fulfilling our daily commute needs to being a part of our lifestyles, cars have served us really well. But overall these years our beloved “wheeled love” have been feeding on our fast depleting fossil reserves and have been happily emitting harmful gases adding to the exponentially rising environmental crisis.

Why Tesla is So Successful

The problem has been identified as the emissions from the vehicles which aid in the greenhouse gas emissions and low-quality urban air and is growing at high rates. In this war against pollution, the automobile industry has been making stricter norms and regulations capping the emissions, improving mileage and performance trying to make more efficient engines also looking at various alternate sources to power our vehicles. Starting from the advent of Plugin Hybrid Electric Vehicles to Battery Electric Vehicles into the automobile market and their government’s incentives, subsidies, tax credits, and other incentives are being utilized to promote EV’s adoption in the mass market.

Why Tesla is So Successful

With numerous efforts being made to make PHEV’s and BEV’s affordable, practical and better performing by almost all the giants no satisfactory success could be seen for more than a couple of decades until the whole automobile fraternity started hearing the name “TESLA” all over the news.

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Tesla is now known to be a pioneer in the Electric Vehicle game. It is surprising to learn that Tesla’s success is not an overnight success but its official incorporation dates back to 2003, founded by silicon valley Engineers Martin Eberhard and Marc Tarpenning with the idea of proving that electric cars are better than gasoline cars and that they can be powerful and beautiful at the same time. We recognize Elon Musk as the face of Tesla, it is yet another shocking fact to learn that he was never a founding member of Tesla, but he later joined as a head of the Board of Directors at Tesla and is also the CEO now.

Elon Musk Vision for Tesla

Elon Musk holds a dual bachelor of science in physics and economics from the University of Pennsylvania. Musk pushed the company forward with the mission, ”to accelerate the dawn of sustainable transport by introducing such convincing electric cars for the masses as soon as possible”. His vision is to produce high-quality electric vehicles that are affordable also.
Where many major automakers have failed dramatically in an attempt to successfully make an EV. Tesla managed to take over the EV segment because of its unique business approach to not just provide a product but adding to it the whole infrastructure and services required to use it up to the satisfaction of the consumer.

Tesla Strategy Analysis

Until Tesla arrived the EV market has been boring. While other automakers had their focus on making it emission-free and economical, Tesla chose to make a compelling car. Tesla realized that with no prior experience in building cars, their first product was obviously going to be expensive so they went for an expensive segment, rivaling the gasoline sports car. The result was the world’s first Performance-oriented electric luxury sports car, The Tesla Roadster.

Once the world was convinced that a Luxury Electric Sports Car is possible, Tesla reinforced its business model, introducing the three-pronged approach to sell, service and charge its EV lineup.

Why Tesla is So Successful  Why Tesla is So Successful

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Why Tesla is So Successful

Tesla has something for everyone. Tesla debuted with the Tesla Roadster, then came the sedan, Model S, followed by SUV, model X. adding to the lineup, then came the Model 3, now will bring the second iteration of the Roadster, shaming all the modern supercars/hypercars with its staggering performance. Tesla also unveiled its fully-electric Semi Truck, a world’s first which is again disrupted the sector delivering unimaginable figures with an energy consumption of less than 2kWh per mile. The latest was the Tesla Cybertruck that generated huge hype.

Tesla Innovation Culture

Tesla has always been driven by innovations, like Autopilot, Over the Air/remote service and updates, Software Updates, AI infused vehicles that communicate realtime gathering driving datas and learning to drive better on autonomous mode.
Tesla Powerwall, home battery is yet another bold attempt to serve energy needs. These serve as energy storage systems in sync solar energy systems to be used as backup power when power is interrupted or in case of peak power demands. Tesla also offers batteries, sensors, motors, solar panels, solar city, roof glass and full solar roofing.

As already mentioned, Tesla has something for everyone. This statement is true to an extent that Tesla provides power-train systems and components to other auto manufacturers as well, like Daimler AG and Toyota. Thus taking a step forward in the direction of sustainable transport.

It has entered in partnerships with many big names like Panasonic, Airbnb, Freightliner, Liberty Mutual, Mobileye, Smartcars, etc.

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Tesla, along with its three-pronged business model, offers financial services which includes standard loans and leases. It has a resale value guarantee provision for some of its loan program, adding to the downside protection on a vehicle’s value in case the customer plans to resell the car.

Tesla Strategy Implementation

Strategy wise, Tesla chose the smart way, initially targeting premium effluent buyers and then moving towards the masses. Focusing on zero emissions and pure energy propulsion using advancements from the technology industry and adding it to the transportation sector Tesla has been able to lead the industry in a particular niche.

Another beautiful thing about Tesla is that it allows its technology patents to be used by anyone. Tesla offers licensing agreements where the recipient agrees not to file patent suits in opposition to Tesla or to simply copy the designs thus controlling its intellectual property.
Tesla has cemented itself in a manner different from others in the auto industry. Tesla in its roots is a Tech Company. Its behavior has seen many trends similar to technology sector companies.

For instance, its stocks shot up by more than 300% within a single year. Its shares have surpassed the prediction of its maturity price of $103 and touched $427.64. Amongst other similarities, Tesla’s valuation has been observed to rise despite of facing losses. Tech companies behave this way, mostly. Tesla has implemented the disruption philosophy with its aim to change the existing business models within the unchanging automotive sector. The overall products and services on offer and Musk together induce loyalty and emotion to its buyers. Aiming at giving them peace of mind Tesla aims at providing an all hassle-free experience, cementing faith of its consumers and investors approve of the company’s future earnings despite the current losses as seen by Tesla’s high negative P/E ratios.

Conclusion

Tesla’s secret of success is not just the invention of luxury electric cars, but the successful business model that has enabled it to kill its competition. The product and the services provided to support the use of its products makes it such a desirable brand that consumers want to associate with. There is also this feel-good factor when using a Tesla product that the user is contributing towards a Greener Planet by reducing his/her carbon footprints by using clean energy and that too in an efficient manner.

Tesla has stamped its name in the automotive history because of its unique out of the box innovations and the exclusivity of the technology being used as Tesla has been the first to bring so many features to the buyers that were thought to be a thing from the distant future. Thus making it so popular amongst the buyers that everyone wants to associate with the brand and be a part of the Tesla family.

RipuDaman Shrivastava
automobile enthusiast oil and gas engineer turned businessman writing for the love of cars

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