Tesla Motors - Corporate Strategy

Corporate Strategy

One of Tesla's stated goals is to increase the number and variety of EVs available to mainstream consumers in three ways; by

  • selling its own vehicles in a growing number of company-owned showrooms and online;
  • selling patented electric powertrain components to other automakers so that they may get their own EVs to customers sooner;
  • serving as a catalyst and positive example to other automakers, demonstrating that there is pent-up consumer demand for vehicles that are both high-performance and efficient.

General Motors' then-Vice Chairman Robert Lutz said in 2007 that the Tesla Roadster inspired him to push GM to develop the Chevrolet Volt, a plug-in hybrid sedan that aims to reverse years of dwindling market share and massive financial losses for America's largest automaker. In an August 2009 edition of The New Yorker, Lutz was quoted as saying, "All the geniuses here at General Motors kept saying lithium-ion technology is 10 years away, and Toyota agreed with us -- and boom, along comes Tesla. So I said, 'How come some tiny little California startup, run by guys who know nothing about the car business, can do this, and we can't?' That was the crowbar that helped break up the log jam." Musk won the 2010 Automotive Executive of the Year Innovator Award for hastening the development of electric vehicles throughout the global automotive industry.

The Tesla Roadster has a base price of US$109,000, €84,000 or GB£86,950 (not including numerous tax incentives, credits and waivers). Tesla's goal is to sell EVs to mainstream consumers at more affordable prices—but Tesla purposely aimed its first production vehicle at "early adopters" so that the company could optimize the technology before cascading it down to less expensive vehicles. The company's subsequent car, the Model S sedan, began production for the 2012 model year with a base price of US$57,400 (or US$49,900 after a US federal tax credit), roughly half that of the Roadster. The company then plans to launch a US$30,000 vehicle, codenamed BlueStar. Tesla also builds electric powertrain components for more affordable cars including the lowest priced car from Daimler, the Smart urban commuter car; the lowest priced car to carry the Mercedes badge, the A-Class hatch back; and the lowest priced SUV from Toyota, the RAV4.

Aiming premium products at affluent "thought leaders" is a well known business strategy in Silicon Valley and the global technology industry, where prices for the first versions of cellular phones, laptop computers and flat-screen televisions start high but drop in subsequent product cycles. However, this approach has been relatively rare in the global auto industry, where the prevailing business model has been one of mass production in assembly plants optimized to build hundreds of thousands of vehicles per year with comparatively low sticker prices. According to a blog post by Musk, "New technology in any field takes a few versions to optimize before reaching the mass market and in this case it is competing with 150 years and trillions of dollars spent on gasoline cars."

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