Tesla – Line of Business

Brief History/ Line of Business

Tesla, Inc. founded in 2003, is a company started by two engineers, Martin Eberhard and Marc Tarpenning. From its first inception the aim of the company was to build a high performance electric car.

The company only started to grow after receiving funding from major investor and current CEO, Elon Musk.

The company's initial mission statement was "to accelerate the world's transition to sustainable transport." However, after Elon Joined the company, the statement was updated. "To accelerate the world's transition to sustainable energy." This small but meaningful alteration was made to widen the span of possibilities for the company's product line, opening it up to future prospects in the untapped energy conservation industry. While focusing of the production of electric motor vehicles, Tesla is making sure not to limit the scope of its business.

For many years prior to the founding of Tesla, the idea of an electric car that could match gas powered cars in terms of performance and aesthetic appeal, was viewed skeptically by engineers and car enthusiasts alike. It was not until Eberhard took a test drive in the Tzero, built buy AC Propulsions, a small electric car maker within the electric-car hobbyist community, that Eberhard realized all the ways in which the electric car not only matched gas powered vehicles but outperformed them at no external cost to the environment.

With increasing awareness of the effects of combustion engine emissions on the environment, Tesla fulfills a crucial role in ushering power production to a new, sustainable era. It is the first and only company to do so on such a scale.

Target Markets

When Eberhard and Tarpenning first envisioned the Roadster, they sought to design a two seater sports car that would compete with lower level sports cars. Taking into account the relatively small size of the sports car market, they realized a car with such promise actually stood a chance at making a dent in the market.

Their customers are mostly males looking for a premium luxury car. These individuals currently own other luxury brands, notably BMW, Mercedes, and Audi.

leading it to be unavailable to most consumers who were looking at higher-end cars

The originally intended target market for the Tesla Roadster included upper class business executives, entrepreneurs and others who had no problem spending over $100,000 on a high end luxury vehicle with a hefty down payment.

Buyer Profile

Male:

83.9%

Female:

16.1%

Income under $50,000:

5.7%

Income $50,000-$99,999:

17.2%

Income over $100,000:

77.3%

18-44 yrs. old:

33.2%

45-64 yrs. old:

50.6%

65+ yrs. old:

16.2%

(Source: Investopedia.com)

As depicted buy the table, an overwhelming majority of Tesla buyers are Male, within the ages of 45-64 years old and have an income of over $100,000. Tesla has since expanded its consumer demographic with the release of later models, such as the Tesla Model S, that cater to a larger audience. In order to have a substantial impact on the motor vehicle market Tesla would need to Cater to more of the middle to upper middle class. Tesla's plan was to use the revenues from sales of the Roadster to produce a more affordable electric car. The cost saving aspect is one of the most attractive aspects of the car for buyers. "With 100 miles using 34kWh (about 100 MPG) and electricity costing an average of $0.12/kWh, the yearly cost to drive a Tesla Model S 85D 15,000 miles is $612." (Investopedia 2017). This electricity expense is nearly half that of gas expenses for similar grade luxury vehicles. Take the BMW 740i for example. For the same mileage of 15,000 per year, averaging 25 miles per gallon while spending about $2.50 a gallon on gas, you can expect to spend about $1,500 on fuel annually.

SWOT

Strengths

Tesla is viewed as a leading innovator in sustainable energy, but more specifically in the automobile industry because it was the first to take advantage of existing technologies to produce a viable electric car at a time when people were skeptical of its possibility. Tesla continues to build upon those innovations with the production of energy storage systems as well as solar energy systems.

Tesla has benefited from being the first company of its kind and occupying such a unique market segment, it functions as a monopoly to a certain degree

Tesla Manufactures out of one plant in Freemont, California. Their relatively small scale production ensures that every part of the process can be overseen meticulously, ensuring the utmost production quality and safety regulation.

Management- Tesla's Founding engineers had an ambitious goal for a car company, and although they had the engineering expertise, they still required the funding to get the company off the ground. In 2004, they were able to score major a investor, Elon musk, who had a vision to take the company even further.

Weakness

Although the small scale of Tesla's production holds its benefits, this drastically limits the company's production capacity. When Tesla released its model 3, the more affordable price point saw a drastic increase in the demand for Tesla products, demand which could not be met by supply at Tesla's current level of production. Tesla employees and current Tesla owners are prioritized when fulfilling orders, however, anyone else interested in purchasing a Tesla is looking at a 12-18-month wait from the time of their reservation to delivery.

Tesla sales are largely reliant upon how vast its supercharger network is. The supercharger is a network of charging ports that allow Tesla owners to charge their vehicles on the go. Although not free they are offered at a much cheaper price in comparison to gas.

Most people are resistant to change and the lack of knowledge about electric cars means a lot of skeptical would be Tesla customers are likely to stick with what they have known for years, the gas powered car. Given how new Tesla technology is, it may take Tesla a while to build such rapport with car buyers.

Opportunities

When Tesla was first founded its purpose was to produce electric cars. Tesla has since altered it image to an energy conservation conservation corporation, expanding the scope of possibilities for future products. Tesla has already begun expanding its product line with energy generation and storage products. The Powerwall is a rechargeable battery with the capability of powering a whole house, as well as solar panels, so people can generate their own energy right at home. With the increasing awareness of the effects of combustion gases on the environment and the need for alternatives, Tesla products are fulfilling a major gap in the market, one which they are sure capitalize off of.

The growing push to go green in Asian countries, Namely China, presents itself as a huge opportunity for Tesla's growth. Given the population of the nation, it would be an extremely profitable market segment to target

Threats

Since Tesla came out there has been an increase in the number of electric/ hybrid cars on the market. Tesla's premium image ensures that they hold a majority of the market share in the E-vehicle market. However, now that there are other manufactures willing to produce electric cars it is very possible a manufacturer can make a car that out does the Tesla. For now though, many manufactures who attempt to sell an electric car, produce and sell it at a loss due to the shear domination Tesla has over this niche

Marketing Strategy

Product

Since the release of the Tesla Roadster in 2008, Tesla has introduced 3 more models to the market. Tesla Model S, Tesla Model X and Tesla model 3.

The roadster is a two seater sports car capable of accelerating from 0-60 mph in just 1.9 seconds and boasting a top speed of 250 mph. This impressive vehicle was Tesla's first release and break into the automobile industry. However, sales of the roadster were targeted at a very niche market. Very few buyers on the market for cars can afford such a vehicle. And of the small percentage that can, an even smaller percentage show an interest in purchasing what many consider an 'in your face" sports car.

The Tesla model S (release 2012) on the other hand is a much more accommodating 4 seater for those who are looking for a quality electric car, but would rather avoid making such a loud statement as the sporty Roadster. Compared to the Roadster, it has a much more modest but effective top speed of 155 mph and can accelerate from 0 to 60 miles per hour in 3.2 seconds. The more affordable price point is another aspect that made the Model S more attractive to a wider range of customers

Tesla continued to vary its product with the release of Model X in 2015, a seven seater SUV ideal for families with children. With a top speed of 155 mph and the ability to accelerate from 0-60 mph in 3.2 seconds, the Model X is currently the fastest SUV in the world. Although it is unlikely that many soccer moms will utilize the full power of this machine, the safety of the vehicle is not at all compromised by its speed. Its front and side Impact protection, as well having the lowest rollover risk, are just a few of the features which qualified the Model X to be the first ever SUV to receive a 5 star rating from the National Highway Traffic Safety Administration.

The cheapest option of the line, Tesla Model 3 was released in 2017. Keeping to Tesla's strategy of using revenues from previous sales to produce cheaper, more accessible cars.

All Tesla Models come with advanced camera sensors that provide 360 degrees of coverage within a 250 Meter radius. This means the car is able to detect hazards on the road and react to them or alert the driver accordingly. This technology not only ensures the utmost security when driving, but enables an in built self-driving feature that car buyers can only look to Tesla to obtain.

Price

Tesla employ's a premium pricing strategy where the high price of a product defines its value, as well as establishing its perception as a high end product in the eyes of the public. The value of the exclusive technology offered by Tesla is definitely reflected in its price. Further justifying its premium price point is the lack of substitutes for the kind of product Tesla provides.

The first and most expensive Car in the Tesla lineup is the roadster. The Tesla Roadster was priced at $98,000 in 2008. That number rose to about $109,000 the next year. The Model S has a starting price of $64,500 for the base model but can rise all the way up to $121,500 depending on what configurations a buyer wants to add on. The Model X starts at $70,700 and goes up to $126,700 with configurations while the Model 3 starts at $32,200 and goes up to $50,200.

Tesla is able to earn more revenue by charging costumers more for the ability to personalize their vehicle. For example, the Model X comes in a 7 seater option, as well as 6 and 5. Every Model Tesla has release, bar the Roadster, has 3 different speed/acceleration configuration to choose from, all which vary in price. Additional features such as Autopilot will cost buyers an additional $5000.

Place

Tesla's main headquarters is located in Palo Alto, California while its main manufacturing plant is located in Freemont, California.

Tesla Has multiple dealerships across the country, however due to state regulation, Tesla is prohibited from selling vehicles in the following states: Alabama, Arkansas, Connecticut, Iowa, Kansas, Kentucky, Louisiana, Michigan, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Carolina, South Dakota, and Texas. Tesla insists on Selling its cars out of its own dealerships, much to the distaste of existing dealerships that distribute cars from multiple manufacturers. One of the main disputes between Tesla and state protected car dealerships is car dealers would have no control over they the price at with Tesla products are sold, or the wages paid to Tesla workers. Tesla is currently lobbying for the right to sell its cars in more states

Promotion/Marketing Department

Tesla is quite unique in the way it promotes its products. While several other corporations, many of which are bigger that Tesla, have expensive advertising budgets to differentiate themselves from competitors, Tesla spends very little to promote its products. There is a huge advantage to being the only one doing what you do in a market. The unchallenged position Tesla holds in the automotive/energy conservation industry means that everyone who is even remotely interested in the field, has their eyes on Tesla. This includes everyone from car and tech enthusiasts, to engineers, environmentalists and your average Joe willing to pay premium price in order to secure premium savings, in the long run.

Tesla also has excellent Public Relations. The name of CEO, Elon Musk, has become a household name due to the Milestones he has reached and Innovations in Technology he has brought forth. Both in partnership with Tesla and single handedly. Musk does not fail to use his publicity by taking to social media to promote Tesla. He shares updates about the company's day to day operations as well as more personal life updates, giving followers a glimpse into the inner workings of Tesla. This level of engagement creates a certain confidence in the company amongst observers. Musk has built a following of over 31.5 million people across Instagram and Twitter alone, not to mention other social media platforms. In a study done by Talkwalker.com showing the total mentions of the world's 29 biggest car brands across social channels, Tesla was the 3rd most frequently mentioned brand name. This means ad campaigns posted to social media are likely to be shared over and over, going viral, and giving Tesla all the promotion they need. Especially in this day and age where a large portion of the research done by prospective car buyers is conducted online.

Value Proposition

The cost saving aspect of owning an electric vehicle is Tesla's number 1 selling point. With electricity costing an average of $0.12/kWh, Tesla owners are awarded the certainty of knowing just how much, or rather, how little their car is going cost them for charging. With the rate remaining relatively constant, worrying about fluctuations in gas prices are a thing of the past. The saving's don't stop at just Gas. The Fact that it is an electric car with completely different inner mechanics to a combustion engine, means that maintenance costs are virtually eliminated. The nature of the 100kWh lithium ion battery that most Tesla's carry allows drivers to accelerate at speeds unmatched by any other non-electric vehicle. It also makes for a smoother, quieter and more controlled ride compared to an internal combustion engine which would have to burn fuel, causing a lag in the acceleration time. Tesla's Lithium Ion battery is placed at the lowest point of the vehicle, perfectly distributing its weigh and centering its gravity. This coupled with its smart sensors make Tesla one of the safest cars you can drive today.

Competitive Environment

For long before Tesla, Car companies were skeptical about how capable an electric car would be and how marketable the concept was. It took Tesla taking the first step, but now, they have opened up a lane for other car manufacturers to follow suit. With big names such as Porsche, Jaguar and Audi (to name a few) having electric/hybrid cars set to release in the coming years, Tesla may be facing its first real wave of competition. Namely the - Porsche Taycan which is said to be a main competitor for the Model S and the all-electric Jaguar I-Pace SUV which will be facing off with the Tesla Model X. The ability of these brands to provide an electric car at a more affordable price than Tesla may determine how long Tesla can hold on to the majority of the market share.

Online Dynamics

Tesla's Website allows users to view all products available for sale by the company, from their cars to their solar panels and even Tesla T-shirts. When viewing vehicles, the interactive layout guides users on a virtual tour of the car as you scroll down the page, highlighting all its features, technologies and specifications. A very helpful feature is being able to compare different models specifications side by side, so buyers can choose the perfect car for them. People interested in purchasing one of the models can then go through the customization process where the interior and exterior design is selected as well as other configurations before asking for a payment method. There is a forum section where Tesla owners and enthusiast can ask questions or exchange ideas that may be entertaining or helpful.

Global Operations/Marketing Metrics

Tesla's products are sold in North America, Europe, China, Hong Kong and Australia However 80% of Tesla's sales are made in North America.

Tesla revenues have grown steadily since its first release in 2008.

As of 2017, the larger portion of Tesla revenues come from the sale of its Automobiles, while a smaller but still reasonable amount stems from Energy generation and storage, vehicle leasing and other services which most likely include income from Its supercharger network as well as other merchandise sold on the Tesla website.

Social Responsibility

Tesla was founded on the basis of sustainability and leading worlds the transition to clean energy. It is the first major company to take a major leap in reversing the damaging effects of tail pipe emissions in the atmosphere.

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