Tesla’s Mission, Marketing Plan Example

Overview

In 2003, Tesla Motors was founded in Silicon Valley in California. The company was named after one of the most integral inventors of the 20^th century; whose thirst for innovation helped drive the outburst of technological advances that has occurred in the past two centuries. The group of engineers at the forefront of the endeavor sought to create an electric car that would be user friendly and affordable enough to replace cars that run on traditional fuel sources. The company seeks to change the name of innovation, create vehicles that run on sustainable energy, and help the environment by producing eco-friendly vehicles. By utilizing innovative designs and groundbreaking technology, Tesla creates unique and in-demand cars for those interested in luxury, battery powered cars (Tesla Motors).

The demand for electric cars has steadily been rising, making now a prime time for Tesla to expand. Where the market for electric cars was borderline nonexistent in 2010, the past five years have seen a significant boom in consumers’ desire for rechargeable cars. This fad, however, will not be dying down anytime soon, as the price of gasoline continues to be a burden on many and the urgency of global warming is constantly pressing people to regulate their activities, so as to cause less harm to the earth (Gartner).

Elon Musk

Born in South Africa, Elon Musk, Tesla investor and CEO has been an essential innovator for various companies such as Zip2, Paypal, and the Space Exploration Technologies Corp, which sent a vehicle to the International Space Station. The company later received support from NASA to recreate the mission. After receiving his Bachelor’s Degree, Musk opted to explore his innovative mind over attending graduate school, dropping out of Stanford University after only two days. Musk brings his programming and design brilliance with him to the companies he supports financially and pragmatically. Musk’s competence is essential to Tesla’s success, even though he divides his time amongst so many unique projects. Tesla, being Musk’s first venture into the car industry; which is primarily monopolized by large corporations such as Toyota, is quite the test of his entrepreneur abilities. The financial success of the company now relies on its ability to grow enough to be a competitor with the more widely known companies, which puts particular pressure on the already over-stretched entrepreneur who is known to work 100 hour weeks (“Elon Musk: Biography”).

Perception

Based on a 2014 Consumer Reports survey of car brand perceptions, Toyota, Ford, Honda, and Chevrolet are by far the consumer favorites. Tesla, while significantly less popular than the top dogs in the industry, was still mentioned as a preferred vehicle brand. The survey consisted of 1,578 car-owning adults, who were asked to name, in their opinion, the best and worst car brand (“2014 Car Brand Perception Survey: Best Car Brands”). This survey proves that Tesla is at least on consumers’ radars of cars to consider. However, as far as electronic cars go, Toyota is the market’s leading producing. With the Camry and Prius both hot on the market, and are a reasonably affordable alternative to traditional vehicles. Therefore, Toyota’s previous success in the electronic vehicle industry has set precedence for excellence.

While Tesla’s reputation for luxury electric cars has been growing, they still have a long way to go before they can be considered a household car for the general public, especially considering the strong competition between the companies that have monopolized a large part of the car industry.

Revenue

While Tesla has had struggles with production, their economic loss is not as great as expected. As of February 2015, Tesla’s shares have gone down 13 cents, instead of the estimated 33 cents that was lost the year before. The revenue for this financial quarter came to $1.1 billion, when in 2014, the company’s revenue only added up to $761 million (Rosenfeld). Tesla also has a number of high-end investors, including Panasonic, that give the company some leeway for improvement (Howell). These statistics may indicate that Tesla is on the financial upswing, but also show the importance of advancing the company’s prevalence.

Tesla’s revenues have been gradually increasing in the recent years, but the company is still just on the brink of financial success. While Tesla is an innovator in the alternative energy transportation industry, its tough competition and previous problems with production keep it from overwhelming economic success.

Roadster

In 2008, the Tesla Roadster was the first luxury electric sports car produced by Tesla motors. It raised the standards for electronic vehicles, but was a relatively small-scale operation (only about 2,400 Roadsters are on the road today). Perhaps the Roadster’s greatest claim to fame is its ability to accelerate from 0mph to 60mph in around five seconds. The Roadster’s capacity for swift acceleration and its overall aesthetic make it an electronic sports car, changing the idea of sports cars as enemies of the environment (Tesla Motors). The Roadsters sold for $112,000-128,500 in the UK, £87,000-£102,000, and $343,888-$427,888 in Singapore (“Tesla Roadster Sport 2.5”). These premium prices solidified the Roadster’s standing as a car for the affluent; an image that Tesla has, in current years, begun to attempt to combat by creating more affordable vehicles in order to make their product more accessible to the general public. The Roadsters, being void of a lot of the heavier machinery found in gas-fueled vehicles, are lighter and much simpler than traditional vehicles. (“Tesla Roadster Sport 2.5”).

Model S

Introduced in 2012, the Model S further advanced Tesla’s reputation for luxury vehicles. This car was a competitor for luxury car dealers such as BMW, Audi and Mercedes. This four-door vehicle also has an incredible amount of space, seating seven. Its flat bottom makes for ideal road handling (Tesla Motors). The Tesla Model S, depending on the amenities added, costs upwards of $50,000, and is often over $75,000 (Bartman). While these vehicles are extremely luxurious, they contradict Tesla’s new goal of permeating their product into mainstream culture, to make it an option for all, not just lovers of pricey sports cars.

Model X

The Model X, to be offered to the public some time in 2015, will be Tesla’s first crossover vehicle. This electric SUV has room for three rows of seating (Tesla Motors). This challenges the notion of electric cars as inherently small. In this vehicle, Tesla proves that size and sustainability are not mutually exclusive. While this vehicle is more pragmatic for families, it still maintains the company’s reputation for excellence with its stylish exterior  and luxurious interior.

According to recent test drives, the Model X will feature more hands free/autopilot options, these innovations could lead to up to 90% hands-free operating. However, Musk has said that he is particularly concerned with making sure the quality and performance of the Model X are perfect, so much more testing and experimentation will be necessary before the company can make these enormous strides (“Tesla Model X Caught Testing Autopilot Software”). The Model X will also feature Tesla’s signature “Falcon Wings,” which take up much less room in the vehicle than traditionally functioning doors. This innovative feature also adds intrigue to the car’s contemporary aesthetic.

Issues

The competitive nature of the car industry is particularly ruthless, as a few large corporations dominate a large part of the market. Furthermore, Tesla has had significant production difficulties in the past. Elon Musk himself said in a shareholders’ letter, “Being unable to increase production fast enough, not lack of demand, is a fair criticism of Tesla” (Maynard). In 2014, the company strived to produce 35,000 vehicles, but soon lowered that number to 33,000. While this was a problem when the company was engineering luxury sports cars, it will be an even bigger issue once their demographic changes and the demand for the product increases. While the company prides itself on the simplicity of the vehicle’s parts, some components of the cars are fairly complex. Creating sizeable vehicles that run solely on electric power and have all the luxuries and modern technological advances of a sports car without making them too costly is not an easy task (Maynard).

Reputation

Changing its image as a company specializing solely in luxury cars, only affordable to the affluent, has been a large struggle of Tesla’s. However, Thomas Bartman claims that “growing down the market” is “akin to sailing against the wind” (Bartman). He claims that Tesla’s goal of reversing its reputation as a luxury car company will be extremely difficult, if not wholly improbable. Tesla plans to use the revenue for their high-priced luxury vehicles to make the partial switch to more affordable cars (in 2017 Tesla promises to produce a car that will sell for $35,000, which would be a reasonable price for a traditionally fuelled car). Bartman, however, claims that one of the biggest problems with this plan is the diminishing revenues that will follow the cheaper vehicles. Changing production to allow for the creation of more affordable cars will be costly in itself, but once Tesla is able to generate these new vehicles, they will draw in smaller profits than the company is used to receiving for its sports cars, which never sell for less than $50,000, and often cost upwards of $100,000. Bartman disagrees with this attempted change of targeted demographic stating, “Better approaches would be either to focus exclusively on a high-end niche that is too small to entice incumbents or to enter the bottom of the market with a low-price product and disruptive business model” (Bartman).

Marketing Plan

While introducing the Tesla to a broader group of consumers will not be an easy task, it can be done with a proper marketing plan that focuses on proper financing and the proliferation of the Tesla image to spread the word that these luxury vehicles will soon be much more accessible to people of a variety of means.

Finance

The finances of building Tesla vehicles for the common people must be honestly addressed, and perhaps the launch date of this transition should be pushed back. It is essential that the company guarantee that the potential failure of this endeavor not have the capability to destroy the company’s past earnings and overall reputation. However, even though this attempt at a change in demographic is a risky business decision on Tesla’s part, they have a strong network of investors backing them up, including Musk himself, as well as support from the government. Even so, it would be wise for the company to consider Bartman’s suggestion of staying in their high-class niche, at least for the time being, in order to earn enough revenue to reasonably support this venture.

Production

Production has been a considerable difficulty for Tesla in the past. The demand for electronic vehicles is strong and ever-growing, but in Tesla’s case, the production does not meet the wants of the consumers. There is a need for efficiency in the company’s production in order for it to move to the mainstream consumer market. Once the price of the vehicles drops, the demand will rise. Whether by acquiring new facilities or adding to their over 2,500 employees, it is essential that Tesla move towards increasing productivity to match the demand for the vehicles (Tesla Motors). Toyota, Tesla’s biggest competition for electric cars, easily matches the demand for their hybrid cars, which puts more pressure on Tesla to succeed and produce quickly (“2014 Car Brand Perception Survey: Best Car Brands”). This further adds the need to consider postponing the changing of demographic until Tesla can make a bigger profit off of their high-end niche in order to support the costs of efficient productivity needed to produce less costly cars.

Quality

Being a car with a significant reputation for power, sustainability, and aesthetic, Tesla’s image of distinction will be important to maintain in the transition. While Tesla seeks to switch up its demographic, the product they produce has made a name for itself by now, and consumers will only be excited by the prospect of buying from the company if the overall aesthetic and quality of the product remain similar. This may involve looking into cheaper materials or making some of the vehicles’ more superfluous features optional, and therefore lowering the price of the machine itself, while leaving the option to add luxury for those who can afford to do so. The company should also market finance plans to allow those of lesser means to pay off their vehicle on a reasonable schedule, which would make the purchase seem less intimidating to buyers. Keeping the quality of the product while significantly lowering the price seems like an impossible task, but with strategic planning and changes in design, Tesla can maintain their product’s reputation for great products that drive like a dream.

Advertising

Tesla’s reputation for luxury cars made for high-end consumers will serve a sizeable roadblock in this endeavor, which is why popular advertising will be important. Especially regarding the Model X, which is bigger and therefore more suitable for families. Advertisements, such as commercials, should be centered on the use of electronic cars for middle class consumers with a need for space. Targeting the new demographic through commercials will be essential to spread the knowledge that electric cars can be sizeable, but also contain the latest luxury and technological features. Breaking down the image of the luxurious sports car perfect for a bachelor will require having an opposing view ready to replace it with. Once Tesla is able to engineer a cheaper vehicle, spreading the knowledge of this innovation will be vital for interesting those not able to previously afford the cars. Many consumers are intimidated by car brands they know to be expensive, so it will be essential for Tesla to press the fact that they have become more accessible to the general public.

Locations

The company also needs to advance its global presence as far as stores and service centers. Traditional gas-fueled cars are available for test drives, purchases, and services virtually anywhere there is a significant demand. Tesla, on the other hand, is only available in 22 of the 50 United States. As the demand for electric cars grows, Tesla must increase its facilities in order to give consumers the ability to experience the cars first-hand and to get the full effect of their luxury feel. Many consumers are also concerned about the upkeep of their new electronic vehicles, so more service centers are crucial for interesting customers. Again, the financing for expansion will have to be gained gradually, but Tesla’s support from investors and the government, as well as the personal funds Musk has contributed to the projects, should aid in the extension of this company, so that a greater number of potential clients have access to the product.

Environmental Aspect

The attraction of Tesla’s product as a zero emissions car is a huge selling point for environmentally concerned consumers. In a Norwegian survey, electric car owners were asked why they made the decision to purchase an electric car over the other, more traditional options, and being environmentally friendly was a large component for many consumers (“Norwegian Electric Car User Findings”).

Banking on this desire to be environmentally friendly is essential for electronic car companies. Those who have the means to purchase cars that use alternative energy sources will often do so in the interest of lowering their carbon footprint and therefore reducing their guilt over the states of the environment. This is a common desire for many consumers, not just upper class persons. This aspect of the vehicles should be directed at all demographics.

Conclusion

In conclusion, Tesla is a relatively new company in an essential period of expansion. The company is a leader in technological advances. Their vehicles, while eco-friendly and sustainable, drive like sports cars in respect to their superior interior design and acceleration rates. In the past, they have solely produced pricey, luxury vehicles, but are currently attempting to alter that image to make their product more attractive to a wider audience. The company’s goal to extend to a less high-end market can be achieved through the proliferation of their image and product. Without thorough exposure and sufficient production, Tesla will not be able to move onto its new demographic.

Works Cited

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Bartman, Thomas. “Why Tesla Won’t Be Able to Scale.” Harvard Business Review. Harvard Business Publishing, 2015. Web. <https://hbr.org/2015/04/why-tesla-wont-be-able-to-scale>.

“Elon Musk: Biography.” Bio.com. A&E Networks Television, 2015. Web. <http://www.biography.com/people/elon-musk-20837159>.

Gartner, John. “Tesla Motors Staying the Course With Model S.” PluginCars. Recargo Inc., 2011. Web. <http://www.plugincars.com/tesla-motors-staying-course-model-s-106589.html>.

Howell, Donna. “Tesla Motors Shows Electric Model X SUV; What Next?” Investor’s Business Daily. William O’Neal and Co. Incorporated, 8 Feb. 2012. Web. <http://news.investors.com/technology/020812-600566-tesla-motors-partners-with-toyota-daimler.htm>.

Maynard, Micheline. “Tesla Shows Signs It’s Struggling With Manufacturing.” Forbes. Forbes Magazine, n.d. Web. 5 Nov. 2014. <http://www.forbes.com/sites/michelinemaynard/2014/11/05/why-tesla-should-take-heat-for-missing-its-targets/>.

“Norwegian Electric Car User Findings.” Before It’s News. N.p., 3 Dec. 2013. Web. <http://beforeitsnews.com/environment/2013/12/norwegian-electric-car-user-findings-10-charts-2486816.html>.

Rosenfeld, Everett. “Tesla Earnings: Loss of 13 Cents per Share, vs. Expected EPS of 31 Cents.” CNBC. N.p., 11 Feb. 2015. Web. <http://www.cnbc.com/id/102417155>.

“Tesla Model X Caught Testing Autopilot Software.” Gas 2. Sustainable Enterprises Media Inc., 2014. Web. <http://gas2.org/2015/04/22/tesla-model-x-caught-testing-autopilot-software/>.

“Tesla Model X.” Elektromobilsro. N.p., 2011. Web. <http://www.elektromobilsro.cz/en/tesla-model-x>.

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“Tesla Roadster Sport 2.5.” Zero Emission Motering. N.p., 25 Nov. 2010. Web. <http://www.zemotoring.com/reviews/2010/tesla-roadster-sport-2-5>.