Tesla Motors Innovation and Success

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The arguable decision may not be understood by the competitors on a first stage, but the intent of the CEO is what makes his company innovative and successful. After the patent release, other companies are able to use them and this will help to develop the electric car market globally. Tesla will not be able to produce enough cars to change the market by itself, they need help from their competitors. This is why the decision makes a lot of sense because new car brands will just help the growth of electric cars and the increase the number of chargers all over the globe. Rather than just building a car, the CEO and his team are aiming to more business practices, creating an alternate business model.

Business model

Business model can be considered more important than the product itself, because a new technology or a new product has no value until it gets commercialized, and this depends on how good is the company to promote itself. This does not depend on advertising only, but by many other factors.

It is important to decide who the product will be sold to, so customers are the heart of the business. Tesla Motors is aimed to sell its product mainly to existing and new customers, who are already driving a car whether it is electric or oil powered. There is no intention to focus to sell the cars to people who have never owned one, as the main intention is to change the market and demonstrate people that electric cars are such efficient as fuel cars.

Tesla’s value proposition is efficient on both quantitative and qualitative levels. The design of the vehicles and the customer experience is comparable to Apple in mobile phones market. Unlike the main carmakers who are only focused on their product and its marketing and leave the rest to the partners, Tesla does not have any partnership with car resellers, as the product is being sold online and delivered to your home. This means that there is no middle-person who is able to change the price of the product. And what more, is that the retail locations where the car can be collected instead of being delivered, are focused on the customers’ experience rather than just finding new clients to sell the vehicle to. As previously discussed, the price and the output of the new Model 3 will be completely different from the previous vehicles produced. The price is very competitive on the market, and the production based on the economy of scale of the vehicles is the main key of the decrease of the cost.

Risks, investments, success

The Gigafactory will definitely drop the production costs as the main core of the car is the battery system. Tesla’s lithium-ion batteries are the most expensive, but at the same time the most efficient of the whole market. The CEO declared that the 5 billion dollars invested in the new factory will be paid back in the near future, and that the amount of batteries will be up to 500,000 a year by the end of the decade.[6] This direct partnership with Panasonic will be Tesla’s biggest asset to produce cars at a competitive price. At the same time, there is an indirect partnership with the rest of the electric car market which consists of the patent release and allows the competitors to enter the market without big funds and try to be competitive, and at the same time participate in the market growth. This decision may seem very risky but, as they are currently leading the market and have this factory that will allow them to produce cheaper vehicles than their competitors, they actually need to be helped by other companies to compete in the traditional car market.

The risks taken do not really worry Musk and his team, he is aware that Tesla Motors is the biggest consumer of lithium-ion batteries of the world and that they will be the market leaders even if anyone else will be able to make more efficient batteries, because the smartest move will be selling the license to them - according to his words.[7] Although Musk position of his product may seem bold, it was not at the beginning as he did not ask any outside money to build the company.[8] And at the same time, he did not even hire people with great experience for producing the first cars. Almost nobody on his team has ever worked for an automotive supplier, as people have been selected by their ability to solve problems rather than their past experience in other companies.[9]

The CEO is aware of what people are looking for and he is providing them a new customer service, like none has ever done before, that goes over the purchase of the vehicle. Tesla cars have an innovative high technology which lets them being remotely connected to the central corporate office. The huge amount of data generated by the car system allows the company to improve the product in real time, pushing software updates to enhance the customer experience. Tesla is able to provide new updates during the night, and inform the users by a simple notification on the phone the next morning. Updates can be related to small UI bug fixes, or to adding new safety parameters or providing new big features to the drivers. This means that the vehicle is always up-to-date and the relationship between company and customers is never over. What more, is that the updates can be collective or individual, with different settings for each Tesla owner. As declared in early 2012,[10] Musk is convinced that it is important to have a feedback loop with the customers, because this is the only way to know what you have done and how could you do it better.

Personal assistance does certainly require a lot of time and money, but at the same time it is how a company can acquire customers’ loyalty. Huge funds then, have been invested not only in the vehicle innovation and facility buildings, but also in a new way to take care about the customers. Anyway, funds do not represent an obstacle for the company as the billionaire CEO is able to provide as much as needed to improve the new technology. But it is not all, as Tesla Motors is able to borrow ideas from the aerospace manufacturer SpaceX previously quoted.[11] All this shows that the company has with no doubts the resources needed to innovate itself. The company is completely autonomous as all the parts of the vehicle are produced in the main factory with no components coming from outside suppliers.

Conclusion – Future

Tesla seems to be on the right path to keep being a leader on the electric car market because of the very strong image and the customers’ loyalty. With such an image and their ability to build cheaper cars than their competitors, especially because of their battery factory, they will obtain more and more customers every day and they are likely to comfort