Tesla has often been referred to as “The Apple of Automakers”. This sole statement speaks plenty about the company’s products, culture, and marketing. Just like Apple and its business model have revolutionized the tech industry, Tesla redefines the image of the modern automaker. It differs greatly from industry peers who have struggled to adapt their product lines to meet the future demand for electric vehicles. This is why Tesla’s marketing approach is considered more “Silicon Valley” than “Detroit”.
Just like a true Silicon Valley company, Tesla represents innovation. Like no other company in the world, Tesla owns this feature, which places it at the top position of the world’s most innovative companies. No doubt there. What makes it even more glamorous and appealing to the global population is not only the stylish look of the vehicles but primarily their efficiency. This makes Tesla a noble benefactor to the world’s struggle with climate change and air pollution, which momentarily raises the support for the brand.
What sets Tesla apart the most, however, is the belief that it is not yet another automaker in the world with decreasing car usage. On the contrary, the distinction is based on more than just innovation. It relies on a promise, a mission that drives every step of the company: “accelerate the world’s transmission to sustainable transport”.
The successful Silicon Valley business models always require innovators to go well beyond the innovation of the product itself. Here are several strategic milestones that Tesla has coined in its plan for bringing electric vehicles to people globally. Tesla’s marketing focused first on generating demand and building brand and product awareness. Only then the company started working on increasing sales and maintaining customer relationships across the world.
Remember the Roadster?
The Roadster was Tesla’s first electric car, and there is no doubt that had it failed Tesla would not have been thinking about dominating the EV sector today. The mission of the Roadster, however, was far away from reaching the mass consumer – its goal was to change people’s perception of electric vehicles in general. And it was Tesla’s first success. Before the release of the Roadster, people associated electric cars mostly with toys. Yes, the ones you operate by a remote control. It was Tesla’s Roadster that initiated the first step toward a change of thought – it showed the wide audience that electric cars could become grown-ups’ new Christmas wishes, too.
The Roadster had set the foundation that allowed Tesla to be an adequate option for consideration for car buyers. The high-end image of the company and specifically the high selling price of the Roadster ($109,000 base price) made electric vehicles an unattainable desire for many. This is why Tesla focused on creating a more affordable BEV (battery electric vehicle) that more early adopters could get their hands on. Model S, with an average price of $57,000 targets upper-middle class consumers, thus competing with the luxury sedan segment.
The recently announced Model X and the upcoming unveiling of Tesla’s new vehicle, Model 3, form the next milestone towards bringing electric cars to the mass market. The price of Model 3 is said to start at about $35,000, which will aim to increase total sales, hoping to reach the goal of 500,000 vehicles a year by 2020. The Nissan Leaf is already present in the mass-market, so the question is – what would set Tesla’s Model 3 apart? The 200 miles driving range? That’s not a bad reason at all.
It is widely believed that the way Model 3 is marketed would be crucial for Tesla and its future success. The high prices of Tesla’s current vehicles are not only hard to apply to the mass market, but they also appeal to people who, if able to afford a Tesla, would probably not be concerned with vehicle operating costs, including fuel. Thus, Tesla’s key differentiation is undermined.
The mass-market models would help Tesla to gain an advantage by providing people with the value of fuel saving.
Supercharge the batteries
One task Tesla needs to fulfill on its way to bringing Model 3 to the masses at an affordable price is to decrease the cost of its batteries. The initiative that the company took to ensure the success of this task was the Gigafactory in Nevada, which will also allow Tesla to vertically integrate further. According to Tesla’s CEO Elon Musk, the Gigafactory will drive down the per kWh cost of Tesla battery pack by more than 30 percent. Therefore, a 50kWh battery that would be used in Model 3 would cost a little over $10,000 compared to the cost of more than $15,000 in 2014. While some consider the capital investment in the Gigafactory a leading cause for Tesla’s losses and poor performance on the stock market in the last six months, others believe it is an essential step toward fulfilling Tesla’s mission to bring EVs to the masses.
In relation to the mission, Tesla has invested largely in developing its own charger network. Over 600 charging stations have been developed across the world along with several thousand individual stallers. This infrastructure is another milestone to the large adoption of EVs and Tesla has already put its check on it. Not only that, but Tesla has launched its battery for home usage, too. This is a proof of the intention of the company to expand its operations and become a true energy systems company.
Unlike most of its peer automobile makers, including Ford and General Motors, Tesla does not rely on dealerships.
According to Musk, dealers would be facing a dilemma between selling traditional high-emission gasoline cars, which constitute most of the dealers’ business, and the new electric car models. This lack of a dealers network could be both an advantage and a disadvantage to Tesla’s contact with customers. For a company, to set up its own distribution network requires massive capital investment. At the same time, it also allows for a more personal customer contact with the brand itself. Tesla specialists who work at the company stores all over the world are not paid commission, and the stores themselves promote the concept of electric vehicles, rather than simply sell cars.
What Tesla holds as another advantage over many other automakers is the test drives the company offers. The test drives are in perfect alignment with the company mission and the image it has built for itself so far. I mean, really, who wouldn’t want to get in an environmentally friendly car which also happens to have incredibly stylish upward-opening rear doors and accelerates from zero to 60 miles per hour in just 3.2 seconds… They got the Corsia team on this for sure!
Partnerships vs. Competition
In addition to manufacturing its own battery electric vehicles, Tesla develops and markets its own electric powertrain components. The company has made them available for sale to other automakers who can then market these parts under their own brand names. Such partnerships have already been established with companies like Toyota and Daimler.
Many would agree that Tesla’s first-mover advantage has been decreasing since the launch of its first car. There are several more luxury sports cars that have established themselves on the market of electric vehicles and have been considered as a potential threat to Tesla’s future success. Many of Tesla’s competitors, however, have only announced concepts for their EVs, which brings Tesla several chic and sporty steps ahead, despite their losses.
What is inspiring in Tesla’s marketing and production strategies is how they manage to stay both faithful to their mission and true to their origins. Tesla’s mission calls for the mass adoption of BEVs, and we can see that tactically the company has been following this promise by creating more and more affordable vehicles with every new model that comes out. And yet, it remains loyal to its style: the sexy and sporty feel of the cars is what makes the vehicle’s design unique and so highly desired. Bringing BEVs to the masses would never make Tesla boring like many other automakers because Tesla knows its core and remembers its roots. Moreover, the Roadster with its hot look, thought by many as long-abandoned, is said to be revived by 2020, which is yet one more sign of Tesla’s dedication to its roots.
We can clearly see Tesla’s “Silicon Valley” approach to globalization in every single stage of the company’s processes. There are differentiators that can be identified not only in the nature of the vehicles but their distribution and maintenance. With the advancement of the company’s product portfolio, we might soon expect the establishment of a worldwide culture revolving around Tesla, too. Maybe Tesla really is the Apple of the automobile industry in the 21st century.