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Tesla’s Unique Position In The Car Market Is One Of Its Biggest Strengths
September 12, 2019
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Tesla Motors is unique because it is not merely selling cars but also selling new technologies. Essentially, betting on Tesla Motors involves betting on a new technology. Simply put, Tesla has created, and now dominates, the market for luxury, long-range electric automobiles, a market that is distinct from both the market for less expensive electric vehicles and the market for luxury gas-powered vehicles. And as the sole player, the company has to not only sell cars but also build out the infrastructure necessary to support the operation of those cars. In Tesla’s case, this involves building out a network of superchargers, battery swap stations, and service stations.

On the face of it, this should make growing the business tougher but Tesla’s unique position in the auto car market can help it achieve that target. Essentially, there is one unique thing about Tesla: Its cars operate in a Long-Range EV car market which consists of just one car currently – the Tesla Model S. Given its pricing, the car falls into the price range of luxury cars which form nearly half of the auto industry’s profits, despite making up just 10% of its unit sales. This makes it harder for other car companies to compete as they cannot afford to risk losing out on their most profitable segment by developing a luxury car that fails.

i would like to share the following UNIQUE points of this car.

A/ No service station

B/ Direct Sales

C/ No lease on a car

D/ No petrol

E/ Higher prices.

F/ First car of the organization

See Our Complete Analysis For Tesla Motors Here

Lack of Competition

A widely misunderstood thing about Tesla is the markets it deals in. Every time an established automotive company announces the launch of an electric vehicle, the business press is quick to announce it as a threat to Tesla Motors. This is a fundamental misunderstanding of two key aspects of Tesla’s business model. Firstly, Tesla is the only company selling production volumes of a high-end, high-range electric vehicle. Every other car company merely experiments with its EVs. The reason behind this is simple: almost all car companies get their cash profits from their high-end ICE (Internal Combustion Engine) cars. If they started releasing production volumes of cars about which customers are still circumspect, they could end up cannibalizing the sales of their high-end ICE cars. It also poses a threat to their market position and their reputation, as well as the prospect of losing a lot of money in the process. So far, car companies have erred on the side of safety and let Tesla lead the push for enlarging the share of alternative vehicles in the overall car market.

Secondly, Tesla’s competition is not other EVs (at least not yet), but high-end ICE cars. So when Tesla releases its Gen III, its competition will be neither Nissan Leaf, Chevy Bolt, nor Chevrolet Malibu and Toyota Camry; but rather the Audi A4, A5, and A6, BMW’s X1, X3, and X4, and Buick’s Enclave, La Crosse, and Regal. So, no, Chevrolet Bolt is not Tesla’s competitor. Tesla’s modus operandi is to sell high-end cars in different car segments and use the profits to realize greater efficiencies in the production and distribution process in order to bring down the unit price and expand its market share.

The Green Car Market Is Segmented

It is easy to make the mistake of treating all alternative fuel cars as belonging to the same car segment. Therefore, hybrid vehicles, plug-in hybrids, short-range electric vehicles and long-range electric vehicles are all treated identically. There are two problems with this kind of categorization: 1) these cars are very different in how they use electric batteries; and, 2) these segments are growing at different rates, so projecting the growth of the EV market by lumping them in together gives a false picture of the market Tesla is trying to capture.

Tesla operates in the long-range EV segment of the market comprised by electric vehicles. Essentially, these are vehicles that can run more than 200 miles on a battery alone. The only car in the market that offers this value is the Tesla Model S. When Tesla releases its Model X SUV later this year, there will be two cars on this market. Even though Tesla missed its target of 35,000 deliveries last year by just under 10%, Model S sales still grew by over 30%. In 2015, Tesla is targeting a sales growth rate of over 66%. That is a tough target but sales of the new Model X can help. According to the company management, the Model X has managed to generate as many as 20,000 deposit-backed orders already and all this without any advertising or even the display of a production version of the car.

About author

Dr Shailesh Thaker

Dr. Shailesh Thaker is a world-renowned management thinker and trainer on organizational behavior and development. He is the CLO of Knowledge Plus Inc., a highly reputed training firm based in Ahmedabad, India, helping organizations to achieve international benchmarks in management practices.

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