Accelerating its way through the extensive track of sustainable transportation, Tesla Motors has surpassed the top automobile manufacturers in the competition and has clinched the title of the most valuable car manufacturer in the world. The expeditious growth of Tesla is a testament to the fact that automotive advancement and clean energy technology can go hand in hand. Tesla stepped into the market by making a statement. It distinguished itself from the traditional automobile makers with environmentally sustainable electric cars and became a niche differentiator.
“Tesla Motors is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy, which I believe to be the primary, but not exclusive, sustainable solution”
- Elon Musk, CEO and Co-Founder, Tesla
With an integrated and centralized IT architecture, Tesla’s unique Business model focuses on value creation for its customers. Tesla contains a vertically integrated business model, whose pipeline goes from manufacturing to direct sales of its vehicles. Tesla recognized the complexity of the supply chain within the automotive industry and revolutionized the sector with vertical integration. From self-driving algorithms to battery production and a robust central control system, Tesla has integrated numerous production steps vertically.
The competition which Tesla has created is not between fully electrically driven vehicles and gas/diesel vehicles, but between two contradicting business models. The incremental value Tesla created for its customers is strikingly higher as compared to any other competitor, which is the key factor for a successful business.
“The largest accomplishment of Elon Musk is to have inspired the people who wanted to change the world and to have given them the opportunity to do it.”
“The Tesla Effect”
Tesla is the only company that constantly innovates and updates its models free of cost. It has a single hardware set that improves with software updates. With a “vehicles built around a computer” approach, customers have a brand new car regardless of how old their vehicle model is.
Tesla is one of the most successful EV (All-Electric Vehicles) companies in today’s automobile industries and with its continuous development and innovation in the field of transportation, it creates an inevitable ‘Tesla Effect’.
The long-living vehicle will hold two times the life or even more of a diesel car, and that too for a fraction of the cost.
With a sustainable — technology approach and luxury centric design, Tesla is steering its way to create a global impact and become the pioneer of innovation.
Tesla’s dedicated emphasis on research and development, along with huge investments in constructing its own manufacturing units, gives it a competitive edge over others.
It has a simple direct distribution model and it sells its product directly to the customers via stores or even online.
Premium product range of the models and the wavering trust of the consumers in electric vehicles is a major shortcoming of Tesla in the hypercompetitive automobile market. The expansion in the global market is also a substantial challenge.
Tesla’s value is more than 3 times the market capitalization of GM and Ford and has the potential to expand even further. This gigantic market potential is reflected in Tesla’s evaluation which generates excessive capital efficiency for its business in future.
No doubt Tesla is a significantly recognized brand, but is a small player in the niche of the automotive industry. This makes it vulnerable to the attack from the big players. But it could expand its leadership role by modelling to manage the risks effectively.
Tesla started off by developing high-performance electric sports cars and shifted the paradigm of the colossal automobile industry.
With the master plan to
“Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero-emission electric power generation options”,
Tesla’s growth trajectory is nothing but exponential, speeding its way through the horizon of a sustainable future.
The article is written for 180 Degrees Consulting, Delhi Technological University, under the campaign #DemystifyingBizModels. To read more content shared by our other consultants, please check out our LinkedIn page- https://www.linkedin.com/company/180dc-dtu