What makes Tesla’s business model unique?

The market for all-electric vehicles is growing. There are many reasons, including new regulations on safety and vehicle emissions, technological advancements, and changes in customer expectations. But the mainstream acceptance and excitement of electric vehicles is largely due to Tesla Motors (TSLA) and its unique business model.

Tesla founder and CEO Elon Musk (Elon Musk) founded the company with a mission to “accelerate the emergence of sustainable transportation by bringing eye-catching mass-market electric vehicles to the market as quickly as possible.”This mission is the backbone of Tesla’s successful business model.

Key points

  • Tesla’s business model is based on direct sales and services, not franchised dealers.
  • Tesla’s business model is particularly focused on launching charging stations. This may be the biggest obstacle to the large-scale adoption of electric vehicles.
  • Tesla has expanded its business model to include energy storage systems for homes and businesses.

Tesla’s first product

Tesla has adopted a unique method to establish its position in the market. Instead of trying to make a relatively affordable car that can be mass-produced and sold, it took the opposite approach, instead focusing on creating a compelling car to create demand for electric vehicles.

In a post on Tesla’s website, CEO Elon Musk talked about the company’s mission, “If we can [mass marketed] Our first product, we would have had it, but for a start-up company that has never manufactured a car, has only one technological iteration, and has no economies of scale, this is simply impossible to achieve. Our first product will be expensive no matter what it looks like, so we decided to make a sports car because it looks most likely to compete with gasoline substitutes. “

As a result, Tesla delivered the first high-performance electric luxury sports car to the market-the Tesla sports car. The company sold approximately 2,500 Roadsters before it ceased production in January 2012. This number will not make General Motors nervous.

Next stage

Once Tesla established its own brand and produced a concept car and brought it to the market, it strengthened its business model. Tesla’s business model is based on its three-pronged approach of selling, repairing and charging electric vehicles.

Direct sales

Unlike other automakers that sell through franchised dealers, Tesla sells products directly to consumers. It created an international network of showrooms and galleries owned by the company, mainly located in the city center.

By owning sales channels, Tesla believes it can gain an advantage in the speed of product development. More importantly, it creates a better customer buying experience. Unlike car dealers, there is no potential conflict of interest in the Tesla showroom. Customers only deal with sales and service personnel hired by Tesla.

Including exhibition halls, Service Plus centers (a combination of retail and service centers) and service facilities, Tesla has 438 locations worldwide as of the end of 2021. Tesla also uses Internet sales-consumers can customize and buy Tesla online.

Home service

In some areas, Tesla has hired so-called Tesla Rangers-mobile technicians to provide services. In some cases, services are delivered remotely. Model S can upload data wirelessly, so technicians can view and solve some problems without personal contact with the car.

Supercharger Network

Tesla has created its own network of “super charging stations” where drivers can charge their Tesla cars for free in about 30 minutes. Of course, the goal is to speed up the popularization of electric vehicles by reducing the operating cost and difficulty of electric vehicles.

Tesla models

Tesla entered the market with a sports car. When it launched the Model S sedan in June 2012, it ceased production of the Roadster.of

Tesla started delivering its first Model X SUV in September 2015.of

In July 2017, as Tesla entered the affordable car category, the first Model 3 deliveries began.In 2020, the base model will start at $36,200.

200,000 USD

The base price of the new supercharged Tesla sports car is touted as “the fastest car in the world.”

Tesla has merged many of its sales centers with service centers, including charging stations. They believe that opening a service center in a new area corresponds to the increase in customer demand. Customers can charge or repair their vehicles at the service center or Service Plus locations.

Tesla also produces all-electric semi-trailer trucks. The truck consumes less than 2kWh per mile. The company claims that it can now travel 400 miles on a 30-minute charge, and is working to expand it to more than 600 miles in the future. UPS is one of the companies that booked trucks for the 2019 launch.

Tesla’s latest model is a supercharged version of the original Roadster, which the company calls “the fastest car in the world”, capable of accelerating from 0-60 in 1.9 seconds. The new Roadster is expected to be delivered in 2023, with a base price of US$200,000. Interested individuals can book a new Roadster with an initial card payment of US$5,000 and a wire transfer of US$45,000. The wire transfer is due within 10 days of the first payment.

Other Tesla products

If you remember, part of Tesla’s mission is to “accelerate the emergence of sustainable transportation.” To this end, Tesla sells power systems and parts to other automakers.

In April 2015, it launched a series of household batteries called Powerwall, which are used as energy storage systems for homes or businesses. They are designed to be connected to solar systems and can be used as backup power sources when power is interrupted or peak demand is high. Tesla also sells solar panels and all-solar roofs, which are roofs made of solar panels that still look like roofs.

Like its rival automakers, Tesla provides financial services including auto loans and leasing. For some loan programs, it has a resale value guarantee clause. If the customer wants to resell the vehicle, this can provide some downside protection for the value of the vehicle.

Is Tesla a technology company?

Many financial analysts and investors view Tesla as a technology company, not a car company. At the very least, this is the reason why they proved that their stock price started to rise in 2013, when the stock price soared by more than 300% in a year.

Publications scrambled to find similarities between Tesla and technology industry companies, which have similar growth rates.Online publication Slate even Ran a piece Compare Tesla with Apple (AAPL) and Alphabet Inc. (GOOGL).

At the time, Morgan Stanley analyst Adam Jonas had been optimistic about Tesla since the company was founded and set a target price of $103 for the stock “at full maturity.” By mid-January 2021, the transaction price of TSLA was US$847.95.

There are several similarities between Tesla and the technology industry. Tesla has accepted the subversive creed of the technology industry. Much like other technology companies, Tesla intends to change the existing business model of the outdated auto industry by selling products directly to consumers. Its product line and founders evoke loyal followers of iconic technology companies like Apple.

Tesla investors, like investors in many technology companies, remain patient in the long-term quarterly losses. They finally paid off: Tesla reported its profitability for the fifth consecutive quarter in the third quarter of 2020.

Bottom line

This is the biggest obstacle to the large-scale adoption of electric vehicles: it can’t happen without the infrastructure for charging on the go. Tesla plans to continue to increase its network of super charging stations in the United States, Europe and Asia.

Tesla did not invent electric cars, or even luxury electric cars. But Tesla did invent a successful business model to bring eye-catching electric cars to the market. Part of this strategy is to establish a network of charging stations to address one of the biggest obstacles to the adoption of electric vehicles: refueling for long-distance travel. Tesla’s unique business model, including maintaining control over sales and services, is one of the reasons why its stock has soared since its initial public offering.

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