The electric car manufacturer Tesla and its CEO Elon Musk have been making it to the headlines ever so often. The man has either haters or lovers, no in-betweens.
Tesla was founded by engineers Martin Eberhard and Marc Tarpenning in July 2003. Even though Elon Musk became a part of Tesla in 2004, initially as an investor, he was named as a co-founder and continues to be the face of the company till date. He has been the CEO of the company since October 2008, thus becoming the longest serving CEO in the global auto industry.
Tesla’s business model, along with Elon Musk’s quirky strategies have been taking the company to newer heights every day. But what makes Tesla different from other automotive companies?
Tesla, unlike the majority of the other carmakers, has been aiming at a complete transition to sustainable transportation by developing high-tech, software empowered cars. The Wall Street values Tesla more like a software company than a carmaker. The reason is quite simple. Tesla’s foremost focus is on technological innovation, a strategy, which aligns it with other software companies like Apple and Microsoft. It develops cars as if it’s developing software. This explains why Tesla’s stock moves in line with tech stocks. Even though the company had been reporting losses for so long, its stock price has been on a rise, a pattern witnessed among tech stocks, reflecting investors’ faith in future earnings.
Just like your smartphones receive regular updates, Tesla’s car software too receives updates, thus, keeping them up-to-date. However, Conventional cars, once purchased rarely ever get updated. You won’t even realize when your newly purchased car will become outdated in this dynamic technological environment.
With environmentalists and governments across the world striving to reduce our dependence on combustible forms of energy, electric cars are gaining popularity. New emissions norms are being rolled out and subsidies are being given to people for buying EVs. No doubt Tesla is much ahead of its competitors in making Electric cars. There is a long way for others to go before they reach Tesla’s level of expertise. Till then, the consumer will keep betting on Tesla over others when it comes to electric cars.
The Tesla business model attracts attention too. While other companies sell their cars through dealerships, Tesla directly engages with its customers. The non-existence of middlemen increases Tesla’s margin. Customers deal directly with Tesla’s employees who are better able to explain the latest technology to them. Customers also have the option to order their car online by logging into the site, choosing the model, selecting the features, making deposit and scheduling pickup. This makes the process hassle free and improves customers’ buying experience. Tesla builds upon valuable customer feedback, which otherwise gets lost in the dealership model. Tesla has established a strong network of self-owned service centers and charging stations. The existence of these facilities in an area increases consumer demand there, thus propelling mass adoption.
Tesla’s advertising budget is meagre as compared to its competitors. Mr. Musk never seems to have fallen for the conventional advertising techniques. Positive publicity generated by the media has always acted in favour of the company, thereby reducing the need to spend millions on advertising. Remember when the company ended up sending Musk’s original red Roadster into space in SpaceX’s rocket? That’s the level of creativity he indulges into. Musk’s publicity has always meant Tesla’s publicity, which he has been leveraging to the fullest.
The vision behind the launch of its first car was well thought out. Even though Tesla’s main aim was to produce high-quality affordable cars, it made its debut by launching a luxury sports car, Tesla Roadster. New technology & lack of economies of scale made one thing clear- The first car will be for a certain segment so that a higher price could be charged. That’s what Elon Musk did. Planning to launch the new Roadster in the near future, the company claims it will be the fastest car ever which can reach the speed of 60 miles per hour in 1.9 seconds.
Apart from electric vehicles, the company is also involved in the production of batteries for power storage at homes and business, solar panels and solar roofing. It sells component parts to other automakers as well.
Clearly, Tesla’s bright future prospects and Musk’s brand image have been the powerhouse that have made the company’s stock soar higher and higher. By mid-January its market capitalization became $107 billion, just below Toyota’s. The company announced a 5-1 stock split to make the stock affordable to common people again. The price has gone so high in the recent months that Musk ended up selling Tesla Shorts in an attempt to mock the people who bet against the stock and short-selled it.
Elon Musk is good at keeping people on their toes with his innovative strategies. Let’s see how the company will maintain its exclusive presence once competitors start coming up with innovative EVs.