Tesla’s Business Model Has Created Disruptive Growth
In mid-2016, under CEO Elon Musk’s leadership, Tesla adapted its corporate mission so as “to accelerate the world’s transition to sustainable energy.” This revision indicates a slight but important transition in Tesla’s business model — yes, it would continue to focus on all-electric vehicle manufacturing, but now it would also fully embrace market opportunities for renewable energy. The newer mission statement signifies the relevance of the firm’s batteries and related energy storage products.
The company proved that selling electric vehicles can be profitable. Yet, in 2017, Tesla’s business model evolved again, with its name change to reflect a broader practical umbrella beyond automobile manufacturing. Tesla, Inc. replaced the company previously known as Tesla Motors, Inc.
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Larger scale businesses generally adhere to the philosophy that growth management requires a view to past and current trends before anticipating future progression. Tesla, best known for being an all-electric car company, has disrupted a legacy industry with a new business model and consumer approach. But Tesla didn’t stop there, as our own Zachary Shahan espoused last year. It expanded to new enterprises, grabbed a stake in key infrastructure sectors, worked to decentralize power distribution, and now offers a new alternative to today’s utility industry.
Tesla’s end products are state-of-the-technological-art — all of which interconnect in a flywheel that incites consumer allegiance across multiple sectors and keeps those consumers coming back to Tesla for more. Let’s review and preview some of these spokes in the flywheel that is Tesla.
Tesla’s Business Model Reflects Its Decade of Innovation
In 2008, Musk stepped in as CEO of Tesla. In June 2009, Tesla also received a $465 million loan from the Department of Energy, which it repaid in full by May 2013. The first decade of Tesla necessarily focused on its automotive persona.
Gigafactories: The name “gigafactory” comes from the word “giga,” the unit of measurement representing “billions.” The term “Tesla gigafactory” refers to multiple gigawatt-hours of battery production per year. Designed to be entirely powered by renewable energy sources, Tesla’s California and China gigafactories are fully operational, and the upcoming Texas and Germany gigafactories are on the cusp of starting production. Tesla CEO Elon Musk has famously said, “The factory is the machine that builds the machine.” As CleanTechnica‘s own Fritz Hasler notes, “You can’t sell cars you don’t make, and Tesla is making an incredible number of cars.”
Cars: Tesla will soon(ish) be producing 5 million cars per year. In the Q3 2021 earnings report, Tesla noted that EV demand is going through a structural shift and that the more vehicles it has on the road, the more Tesla owners are out there sharing their positive experiences owning an EV. Those drivers are enjoying the experience of being behind the wheel of the Model S, the Model 3, the Model X, and the newest model, the Model Y (S3XY).
Trucks: Tesla’s futuristic electric pickup truck created quite a stir when it was spotted in New York City prior to Elon Musk’s appearance on Saturday Night Live in May. The Cybertruck prototype was also seen at Tesla’s under-construction gigafactory in Austin, Texas, when Elon Musk visited to check the progress of the manufacturing plant. The Cybertruck will be built with an exterior shell that resembles “a nearly impenetrable exoskeleton” with 30X cold-rolled stainless-steel structural skin and Tesla armor glass.
Semi: With 4 independent motors, 0–60 mph in 20 seconds fully loaded, instant traction control, enhanced Autopilot, and the quickest speed in its category up the grades, the Tesla Semi will travel a distance of 800 kilometers (500 miles) on a single charge once it is produced, and the battery is expected to gain 640 kilometers (400 miles) of range in a 30 minute charge.
Seats: Tesla not only brought seat manufacturing in-house — it applied the automation it has become known for in the industry to its seat factory, which has resulted in the most highly automated lower seat assembly in the automotive world. Additionally, by 2017, all Tesla seats became available from synthetic materials. In 2019, the last animal products were removed from the Model 3 — a new, synthetic-leather-wrapped steering wheel was revealed.
Service: Tesla mobile service visits (where a Tesla technician drives to the owner’s home in a Tesla service vehicle and tends to the owner’s needs) have produced some very happy customers, as they don’t have to worry about Tesla Service taking advantage of them or boosting its bottom line at the customer’s expense.
Used Cars: Used Tesla cars are available for pickup at certain Tesla locations. Tesla can also ship a used vehicle to a local delivery center (accompanied by a non-refundable fee between $500 and $2,500 based on the length of shipment and paid at time of order). Teslas hold their value, that’s for sure, and many used Teslas are gaining value upon trade-in.
Infotainment: A key for a Model 3 or Model Y resembles a business card while allowing you to lock and unlock the vehicle, as does your phone. The super-sized touchscreen display is well-suited for navigation with live traffic data and satellite imagery. Need to relax while charging? The system offers a variety of settings and entertainment options, like Netflix and YouTube. Autopilot, the smartphone app, and the Easter eggs are just the beginning of the many-layered infotainment in a Tesla. “Tesla clearly puts as much thought into its connectivity and infotainment systems as it does the rest of its vehicle design,” wrote PCMag’s editors. “Respondents appreciate Tesla’s focus on the driver and passenger experience,” which earned Tesla PC Magazine’s second straight Readers’ Choice Award.
Car OS: Teslas regularly receive over-the-air software updates that add new features and enhance existing ones over Wi-Fi, and these are free of charge. The OS keeps a Tesla in a constant state of modernity, so that solving a Tesla recall in most cases means sending an over-the-air remedy.
Final Thoughts
Tesla seems to be constantly adding new processes and divisions. It takes a whole lot of tasks to design, develop, manufacture, sell, and lease electric vehicles and energy generation and storage systems and deliver services related to the company’s sustainable energy products. The automotive segment alone offers the design, development, manufacturing, sales, and leasing of electric vehicles as well as sales of automotive regulatory credits.
Essentially, business expansion allows the fulfillment of Tesla, Inc.’s corporate responsibilities. Each business segment has the Musk touch, and his projects seem to have the intent to solve major industry and global problems. In doing so, Musk drives Tesla’s business model and leads teams that ignite a disruptive fundamental rewiring of each space or sector it addresses.
What other Tesla enterprises can you name? In the second installment in this series, we’ll turn to the non-automotive companies that, while sometimes behind the scenes or off the media radar, are indicative of Tesla’s rise to market dominance.
Featured image by Carolyn Fortuna/ CleanTechnica
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