The Tesla business model operates as a Direct-to-Consumer (D2C) business model as it sells directly, cutting out middlemen such as dealerships and offering its own charging station network. Which of these names do you recognize more easily: Tesla or Elon Musk? While, in general, we identify the author by the work — that is, it would be normal for you to know Elon Musk as the CEO of Tesla —, in the case of this visionary eccentric, in particular, it is quite common for the opposite to happen: Tesla being Elon Musk’s company.
But, anyway, in addition to its charismatic and incomparable leader, Tesla is also characterized by being a company that is basically divided into three business models: an auto-maker, a hardware supplier, and a tech company. We will know, then, how everything works in this hybrid business model, which has faced great challenges in the market. Follow up!
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Tesla, Inc. is an American company, founded in 2003 by two engineers, Martin Eberhard and Marc Tarpenning, originally as Tesla Motors. Fourteen years later, the company would change its nomenclature, because it started to incorporate supply lifestyle products in its production.
Tesla’s first product was launched in 2008 — the Tesla Roadster, the high-performance electric sports car, whose sales ended four years later, in 2012. Instead of launching a cheaper first car, to gain in quantity, the Roadster was a luxury item. Musk, the company’s CEO, explained that, with all the technology they intended to put in the car, it would be impossible for it to reach the market at a low price. For this very reason, they chose to launch a product, above all, compelling.
In the following years, Tesla invested heavily in marketing, research, and development, prioritizing studies in safe, autopilot, and charging cars. In 2018, Tesla was already the largest seller of electric cars in the world, with more than 250,000 units sold, taking up 12% of that market.
As mentioned a few times, Tesla is owned by the eccentric billionaire Elon Musk. Although founded by Martin Eberhard and Marc Tarpenning back in July 2003, Elon Musk has been the CEO and chairman of the company since 2008.
Tesla’s mission is to accelerate the world’s transition to sustainable energy.
Currently, Tesla’s business model is based on three foundations: selling model, servicing, and charging network.
First of all, unlike other automakers that have their cars sold by dealerships worldwide, Tesla focuses on direct sales. This means that all Tesla stores are an arm of the company itself and that anyone who is served in that space will, in fact, be received by an employee of the manufacturer itself.
This allows Tesla to improve its product through direct and fast contact with the customer and guarantees them differentiated service facilities, which include the possibility of customizing a vehicle via the internet. In addition, the company has service centers in all places where it sells its cars, with personalized service, including Tesla Rangers, technicians that the company sends to people’s homes for service.
These centers also have a charging service. But, more than that, Tesla also has an extensive network of Supercharges stations, where cars can be fully recharged in up to 30 minutes — at no cost. Of course, in addition to these three factors, there is still a difference between the company’s own products. Tesla has the fastest and longest-range electric cars on the market, with unique design and brand identity.
Finally, there is still the entire research and development process promoted by the company. Tesla invests heavily in hardware and software, focusing on digital technology and even autonomous driving cars. And yet, it increasingly seeks to reduce CO2 emissions, through investment in sustainable energy, which guarantees the support of the government.
Certainly, its most important revenue stream was and remains the sale of electric cars, representing more than 80% of its revenue, which is estimated at more than 20 billion dollars. The other 20% of income includes automotive services and vehicle leasing, but also sales of solar energy systems and storage products (about $1.5 billion).
You can look at the Tesla Business Model designed in the Business Model Canvas below:
Tesla has developed vehicles for every type of customer. From the mid-market range, with affordable pricing, to the high-end luxury and sports cars, competing with Porsche or Ferrari. In addition, Tesla is also covering the commercial vehicle sector, providing a greener option for transportation and shipping. And, of course, it’s worth remembering that Tesla’s customer segments include fast, eco-friendly car enthusiasts, with autopilot — and, surely, Elon Musk followers.
Regarding automobiles, Tesla’s value proposition includes a greener solution that adds high performance, design, functionality, efficiency, long-range, flexible, and low-cost (or free) recharging. Aside from its own vehicles, it is worth remembering that Tesla sells home batteries and solar panels to residential and commercial customers, providing convenience when it comes to power. In addition, Tesla still sells systems and components to other auto manufacturers, as well as financial services, with loans and leases.
The channels that Tesla uses to reach its audience, as seen throughout this article, are its own stores, its website (self-service online store), conferences, and sales events. As stated above, the company doesn’t spend a lot on advertising. It believes in the power of its own brand and reputation, in addition to the charm produced by the CEO, Elon Musk.
One of Tesla’s foundations is the customer relationship, because, from the beginning, the company has focused its efforts on the customer experience. That is why the company chose, as mentioned above, to implement company-owned stores instead of dealerships, in a direct-to-customer sales model. Besides, customers can choose, order and customize their car directly via the website. In addition, Tesla is also increasingly investing in its charging network, to charge Tesla vehicles more quickly, at low or no cost. Finally, Tesla has built a very positive brand and reputation with the public, always being associated with luxury, technological and innovative vehicles, and taking into account the environmental impact.
Tesla’s key resources are those that allow it to fulfill its key activities in order to deliver its value proposition. Therefore, we can highlight its cutting-edge technology and engineering, its long-life battery systems, its design, and its software.
Tesla’s key activities include:
Tesla has a very broad cost structure, like any manufacturer, which includes:
Below, there is a detailed SWOT Analysis of Tesla:
-> Read more about Tesla’s SWOT Analysis.
Tesla did not invent the electric car, but possibly it was largely responsible for shedding new light on this product on the market, by producing cars with differentiated design, long-lasting batteries, and a whole technological support and servicing network. In addition, it implemented a business model practically unique in its area, by selling directly to the consumer, without middlemen. It can, therefore, be said, without fear of making a mistake, that Tesla is one of the most successful automobile industries today and certainly Elon Musk and his peers continue to seek new and original methods of transportation.
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These articles are so intricate and informative. You have done me great service Daniel. Thank you for the information.
Thank you for your comment, Brooklyn!
Tesla's weak spot is customer service. Ordered accessories through the Tesla website. One of the items was lost or stolen during shipping according to FedEx. They told me to contact Tesla as the product I paid for never arrived. You cannot call anyone at Tesla. I went to the local Tesla store, they could not help me, emailed Tesla three times, no response. Finally had to request the funds back from my credit card company. To date, Tesla doesn't respond. It's really crazy.
Thank you so much Daniel for your effort