2. introduction

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Table of Contents

1. PREAMBLE....................................................................................................................... 2

2. INTRODUCTION .............................................................................................................. 2

3. SUCCESS OF TESLA MOTORS....................................................................................... 3

3.1. UNDERSTANDING MARKET ENVIRONMENTS................................................................ 4

3.2. COMPETITORS ANALYSIS & MARKET POSITION.......................................................... 5

4. TESLA’S MARKETING SUCCESS FORMULA............................................................... 5

4.1. SEGMENTATION & TARGETING ................................................................................... 6

4.2. MARKETING MIX ........................................................................................................ 6

Products...................................................................................................................... 6

Promotion.................................................................................................................... 9

Place ........................................................................................................................... 9

Price.......................................................................................................................... 10

5. CONCLUSION................................................................................................................. 12

6. FUTURE RECOMMENDATIONS.................................................................................. 13

APPENDIX 1: DETAILS ON PEEST ANALYSIS................................................................... 14

APPENDIX 2: TESLA MODEL S VERSUS COMPETITOR.................................................. 16

REFERENCES......................................................................................................................... 17

BIBLIOGRAPHY..................................................................................................................... 20

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Tesla Motors from a 19th century Design to 21st century and Innovators and

Electrical Vehicle Leaders

1. Preamble

Thinking about Electrical Vehicles (‘EV’) is like imagining the future, however, in reality

EV were developed and produced in 1800s, EV dominated the steam and gasoline vehicles

in 1909 reaching 30,000 registered EV in U.S. alone (Høyer, 2007). With the technology

advancement in Internal Combustion Engines (ICE) and Oil revolution, it started to be more

feasible and economical to shift to ICE vehicles (Høyer, 2007). The resurrection of EV

production was supported by UN World Commission for sustaining the environment for

better future, and the UN Green Economy initiative that aims for economics growth,

resource sustainability, and preserving the environment (UNDP, 2010 and WCED (1987,

cited in Høyer, 2007) this led for hidden race between automakers to deliver an

environment friendly vehicle and meets the consumer needs, which was first met by Toyota

Prius in 1997 (Høyer, 2007).

Tesla Motors is the 21st century market success story in EV automaker industry, this report

aims to analyze the marketing success factors contributed to Tesla’s success, Tesla’s

utilizations of marketing mix, and highlights key recommendation for Tesla’s future.

2. Introduction

Tesla Motors (‘Tesla’) was founded in 2003 by Silicon Valley inventors with an aim of

producing pure electrical vehicles, based on original 1888 Nikola Tesla electrical motor,

Tesla’s mission is “To accelerate the world’s transition to sustainable transport and bring

mass market electrical cars to market as soon as possible” that makes Tesla not only a car

manufacturing company, but also a technology and energy innovation company. (Tesla

Motors, 2016).

Maneuvering in a very competitive market with high barriers of entry that requires strong

financial and infrastructure support (The Economist Intelligence Unit, 2012), just after 16

years, Tesla managed to re-define the automaker industry with successful launch of its main

stream model 3, achieving the biggest marketing and financial success in the history of any

industry, recording $ 7.5 Billion U.S. dollars worth of pre-orders in just 24 hours (The

Economist, 2016 and Randall, 2016). Tesla is the anomaly that survived the market high

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entry barriers compared to its peers/startups with successful strategies, business model and

marketing approach lead by Tesla’s CEO (Muller, 2013).

3. Success of Tesla Motors

“For Marketing strategy to be developed successfully, it is necessary to understand an

organization’s strategic context and then to fit the marketing strategy...” (Baines & Fill,

2014). Tesla gained its success of being the zero emission automaker that successfully

delivered workable production vehicles that address consumer needs (Mangram, 2012).

Additionally, Tesla has gained market attention in the automaker industry similar to Apple

and being ranked #1 world’s most innovative company in 2015 by Forbes (Forbes, 2015),

and ranked #3 in 2013 after big players like BMW and Mercedes in selling electrical cars

and #1 in electric automakers (Reynolds, 2013 and Hartung, 2013). Financially, Tesla

created a success with steady increase of revenue since 2012 second quarter when Model

S delivery started shown in Figure 1.

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3.1. Understanding Market Environments

A quick PEEST analysis for EV automaker can be summarized by the following:

Tesla is operating in a positive environment, which enables success of environmental

friendly vehicles, Tesla’s products have the political and legislative support to achieve

environmental sustainability. Consumers are looking for a suitable alternative to ICE

vehicles in support of environmental issues, and to unlock the economical benefits of

saving from fuel and running costs. Also, governments realized the economical benefits of

adopting green vehicles as means of transportation based on the economical value to

nations’ GDP and environmental sustainability. Finally, with technology advancements in

long lasting batteries, and recharging networks that made governments establish platform

for Tesla’s success. Refer to Appendix 1 for additional details of PEEST analysis.

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3.2. Competitors Analysis & Market Position

Tesla is taking advantage of big companies’ slower movement to capture new profit

opportunities, and focus on what they do best and trying to shift to make EV (Flowers,

2008). Tesla has chosen a niche market segment of providing luxury, stylish, long

range EV on a single charge and more horsepower with no direct competitors (Tesla

Motors, 2016 and Gould and Muioi, 2015). In addition, when Tesla launched the

Model 3 for mass-market, it gained the competitive edge over other automakers with

supercharged stations across U.S. and Europe and functions that meets consumers’

needs, making Tesla the lead competitor for giant automakers to be aware of, adding

the past success of Tesla being ranked #1 in EV sales in 2013 operating with almost

no direct competition (McGee, 2016 and Hartung, 2013 and The Economist, 2016).

4. Tesla’s Marketing Success Formula

A strong marketing strategy will ensure success, which is the fault of many start ups

tend to forget and focus on operational aspect of the organization (Flowers, 2008).

Tesla didn’t focus on lavish marketing approaches to succeed, but focused on

understanding consumers’ needs, and establishing loyal consumers by focusing on the

Tesla EV ride experience and functionalities. Moreover, Tesla way of selling is by

itself a differentiator from other competitors, by reinvented the sales channels and

cutting the car dealership methods, reducing the overhead costs (Trefis Team, 2016

and Reynolds, 2013 and Gould and Muioi, 2015).

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4.1. Segmentation & Targeting

Tesla aims to contribute to cleaner environment and by changing the transportation

means to be cleaner and efficient use for every consumer (Tesla, 2016). Realizing this

mission requires Tesla to adopt multi-level approach in marketing their products

(Mangram, 2012):

a. B2B Market: Tesla encourages the partnerships with other automakers by

having its technology patents open for use, by this enables Tesla achieve its

mission of sustainable transportation (Tesla, 2016). Tesla partners with big

automakers and sells the drivetrain and battery technologies to automakers

to produce their models, such as, the Toyota 2012 RAV4 EV (Fleming,

2013) and German automaker giant Mercedes-Benzes (Yared, 2014).

b. B2C Market: Tesla targets the consumer by three main models, the luxury

sedan Model S, the family SUV Model X, and the mass market Model 3. In

addition to the complimentary products (Tesla Motors, 2016)

4.2. Marketing Mix

A successful implementation of organizational strategy requires efficient and effective

utilization of the marketing mix, enabling the organization to communicate

successfully with consumers (Proctor, 2002). Tesla is not only considered a technology

innovator or electrical automaker, Tesla redefined the industry business model and the

utilization of the marketing mix to achieve its strategic goals. Tesla re-invented the

automakers approach in selling its products and distributed the market (Reynolds, 2013

and QMAC, 2016). Examine Tesla’s Marketing Mix components as follows:

 Products

 Targeting automakers, Tesla sells its drive-train technologies and

lithium-ion batteries to automakers, because of reduced cost and long

lasting duration of batteries (Fleming, 2013 and Yared, 2014). With

increasing demand of EV batteries, Tesla partnered with Panasonic to

build “GigaFactory” to be ready by 2017 to meet Tesla’s own demand

for its EV and their clients (Economist, 2014).

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 Targeting consumers, Tesla focus in making the suitable car for

consumers considering all aspects of their needs, such as, environmental

friendly, long distance travel on a single charge, horsepower, loaded

with useful latest technologies and gadgets, high level of road safety,

and the key element is the modern stylish design of Tesla’s models, in

contrast with regular automakers and EV startups tend to design and

build either futuristic cars or small compact cars to resolve some of the

issues related to electricity consumption, which don’t appeal to

consumer making (The Economist, 2014 and QMAC, 2016).

“A Tesla is a more stylish way of displaying environmentalist

credentials than a lumpen Toyota Prius and more practical than a

Ferrari—putting two child seats in the back boosts the capacity to seven

passengers” (The Print Edition-the Economist, 2014).

Appendix (2) compares EV models and clearly shows Tesla Model S is

taking the spot lights (Davies and Nudelman, 2013)

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 Complimentary products, Tesla builds Supercharger stations across the

world, enabling Tesla’s vehicles and other electrical vehicles to utilize

those supercharger stations. Tesla’s Supercharger stations more efficient

and effective in battery charging, and in less time that regular charging

technologies which gives them a competitive edge over the market.

(Girotra and Netessine, 2013 and Trefis Team, 2016 and Tesla Motors,

2016). Tesla provides “Powerwall” a home battery to utilize with solar

power for storing energy, providing efficient use of home electricity

even at night, with more than 1,000 consumers utilizing Tesla’s

Powerwall alongside Solar Panels to store electricity (Economist, 2014).

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 Promotion

In just 24 hours from launching Model 3 prototype, Tesla recorded a 198,000

reservation orders of a vehicle that would start production in late 2017, this

shows how Tesla’s promotion strategy is effective in reaching its consumers

(Randall, 2016). Tesla succeeded without spending on mainstream promotions

and no plans of hiring an advertisement agency, Tesla focuses on

communications through its website, stores and social-network capturing

client’s experience driving a Tesla (AdvertisingAge, 2013). In addition, Having

Tesla’s CEO as the face of the company with over 2 million followers in social

media updating the world of Tesla’s mission, products and stories (QMAC,

2016).

 Place

Tesla is all about the consumer experience, exclusivity and modernization from

establishing interest of buying a Tesla model to even aftersales services. Tesla

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reinvented the purchasing experience of a vehicle, Tesla removed the

“middleman” traditional dealership approach by directly selling to end

consumer. It didn’t stop at channel selection but also carefully opening Tesla

stores at shopping malls with no stock of cars, consumers go to Tesla’s shops

for the experience and learning more about Tesla’s technologies, mission and

exclusivity of being each purchased car customized for its owner (QMAC, 2016

and The Economist, 2015).

Another sales channel is Tesla’s interactive website ordering applications that

provides full control to the consumers to make the purchase, while

understanding all aspects of the products and number of varieties of

customization (QMAC, 2016 and The Economist, 2015). Even aftersales

support is completely managed by Tesla ensuring quality of service and

enhanced customer experience, as most of the vehicle services are software

update, Tesla provides over the internet update to its models without the need

of visiting a service center (QMAC, 2016)

 Price

Currently, Tesla is classified against luxury automakers segment as Tesla’s

current models are compared to Mercedes S Class, Porsha, BMW…etc. So far.

Tesla Model S starts at 70,000$ which is highest of EV cars, but still Tesla sold

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more cars in Q1 of 2013 than Mercedes or BMW similar models (ValdesDapena,

2013).

Tesla strategy to produce mass market EV (Model 3) at a range of 35,000$ and

lower, this can be achieved by completing of “Gigafactory” and advances in

battery technologies, giving Tesla the competitive edge over the EV market

(The Economist, 2015 and Davies and Nudelman, 2013).

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5. Conclusion

Tesla achieved its mission of successful delivery of environmental friendly cars to

consumers, whither through Tesla’s top of the range vehicles or through Tesla’s innovative

technologies that are open for other firms to build on.

It’s true the market macroeconomic environment provided the required infrastructure and

demand enabling Tesla to successes, but Tesla’s success came from its strategic business

model, which is built around Tesla delivering what is the consumers need. Tesla succeeded

in building loyal consumers base by actively communicating with consumers to understand

their needs, experience and delivering the right products. Tesla’s adopted business model

outcomes were tangible during the launch of Model 3 recording over 800 individuals in

single Tesla store to place their advanced reservation amount (@elonmusk, 2016).

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6. Future Recommendations

Moving ahead Tesla will definitely have a continuing demand for its products and

technologies, and playing a major role as innovators for sustainable transportation with

several speakers and articles predicting that the near future transportations won’t be based

on ICE vehicles (Urquhart, 2013). It is important to sustain Tesla’s position in the market

for future the success established by Tesla’s market, key recommendation raised from

conducted research are:

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Appendix 1: Details on PEEST Analysis

 Political/Legal:

Governments are supporting the UN’s green initiative and working to reduce

carbon footprint, with setting target to achieve a certain CO2 emissions levels,

which creates a need for environmental friendly means of transportation, Figure 2

shows targets set by leading countries to reduce carbon footprint. (McKinsey &

Company, Amsterdam Roundtable Foundation, 2014).

Inline with governments’ initiative different laws/legislations were in place to

support citizens shift to EV, such as tax reduction/exemptions, free parking or

other means. This political/legal aspect established a demand for greener cars, for

example, Toyota is planning to double its production of green flagship model

Prius (The Economist Intelligence Unit, 2012).

 Economic:

Shifting to EV contributes positively to the economic growth, both at consumer

and nation levels. Saving fuel costs and ability to spend the saved money in

different items, leads to better circulation of money in economy at whole (Ozaki

and Sevastyanova, 2009 and Gallagher and Muehlegger, 2008). In Addition,

adopting new technologies resolves national economical issues such as,

unemployment by increasing demand for different skill sets and opens doors for

supporting businesses to service EV, which contributes to national GDP

(McKinsey & Company, Amsterdam Roundtable Foundation, 2014 and Hecker,

2005).

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 Ecological:

The political aspect is highly linked with ecological aspect of this analysis, as

mentioned in point 3.1.1, there is strong push started in 1986 by WCED and UN

to reduce carbon footprint and preserve the environment WCED (1987, cited in

Høyer, 2007). In support of environment preservation, California State placed

zero emission regulation in 1990s, which started the race again for research and

development of EV and home of Tesla Motors (Høyer, 2007).

 Social/Culture:

Consumers’ buying behavior are strongly linked with economical benefits of longterm

saving, and contribution of preserving the environment (The Economist

Intelligence Unit, 2004), Figure 3, shows top motivation for customers to purchase

EV (Ozaki and Sevastyanova, 2009)

 Technological:

The EV history started with advances in battery technologies, and passing the 60

mile range limitation (Høyer, 2007), Governments are supporting EV automaker

by investing in new technologies that motivate the consumers to buy alternative

vehicles than ICE, such as the smart roads in UK that aims to recharge the vehicles

while it moves. (Highways England Company Knowledge Compendium, 2015).

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Appendix 2: Tesla Model S versus Competitor

Tesla models are packed with major horsepower over competitive that allows Tesla’s vehicle

compete with traditional cars in driving experience and acceleration. Most importantly, Tesla

cars travels double the range of existing electric car on single charge. Finally, Tesla cars looks

modern, pragmatic and loaded with functionalities that meets consumers’ needs.

Source: http://www.techinsider.io/tesla-versus-other-electric-cars-2015-9

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References

 Karl Georg Høyer (2007) The history of alternative fuels in transportation: The case

of electric and hybrid cars, ScienseDirect (2008) 63 71

 Economist Intelligence Unit (2012), Agent of Change: The future of technology

disruption in business report, The Economist, The Economist Intelligence Unit N.A.,

Incorporated.

 Tesla Motors (2016), About Tesla, https://www.teslamotors.com/about, Access 28th

Mar, 2016.

 Myles Edwin Mangram (2012), The globalization of Tesla Motors: a strategic

marketing plan analysis, Journal of Strategic Marketing (2012) 289-312

 Forbes (2015), The World’s Most Innovative Companies,

http://www.forbes.com/innovative-companies/, Access 6th of Mar, 2016

 Joann Muller (2013), The Real Reason Tesla Is Still Alive (And Other Green Car

Companies Aren't), http://www.forbes.com/sites/joannmuller/2013/05/11/the-realreason-tesla-is-still-alive-and-other-green-car-companies-arent/#4d641b5c239c,

Access 10th Mar, 2016

 Siimon Reynolds (2013), Why You Should Copy

 Tesla's Way of Marketing,

http://www.forbes.com/sites/siimonreynolds/2013/09/01/why-you-should-copyteslas-way-of-marketing/#50bb40453c51,

10th Mar, 2016

 Paul Baines and Chris Fill (2014), Marketing, 3

rd Edition, Oxford University Press

 Tesla Motors (2016), Forums, https://forums.teslamotors.com/forum/forums/teslatimeline-0,

Access 25th Mar, 2016

 McKinsey & Company and Amsterdam Roundtable Foundation (2014), Electric

vehicles in Europe: gearing up for a new phase?, Amsterdam Roundtable Foundation.

 Ritsuko Ozaki and Katerina Sevastyanova (2009) Going hybrid: An analysis of

consumer purchase motivations, Energy Policy 39 (2011) 2217–2227.

 Keey Sims Gallagher and Erich Muehlegger (2008) Giving green to get green?

Incentives and consumer adoption of hybrid vehicle technology, Journal of

Environmental Economics and Management 61 (2011) 1-15

 Economist Intelligence Unit (2004), Why the future is hybrid, The Economist, The

Economist Intelligence Unit N.A., Incorporated.
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