Tesla is one of the few cleantech companies to be thriving today and not many companies have attracted as much scorn and adoration as they have. Tesla’s success is instructive and let’s shed some light on it.
- TECHNOLOGY: Tesla’s technology is so good that other car companies rely on it; Daimler uses Tesla’s battery packs; Mercedes- Benz uses a Tesla powertrain; Toyota uses a Tesla motor. But Tesla’s greatest technological achievement isn’t any single part or component, but rather its ability to integrate many components into one superior product. The Tesla model S sedan elegantly designed from end to end, is more than the sum of its parts.
- TIMING: In 2009, it was easy to think that the government would continue to support cleantech: “green jobs” were a political priority. Elon Musk right away saw a one-time opportunity and in January 2010 Tesla secured a $465 million loan from the U.S. Department of Energy.
- MONOPOLY: Tesla started with a tiny submarket that it could dominate: the market for high-end electric sports cars. Starting small allowed Tesla to undertake the necessary R&D to build the slightly less expensive Model S, and now Tesla is expanding to broader markets.
- TEAM: Tesla’s CEO is the consummate engineer and salesman, so it’s not surprising that he’s assembled a team that’s very good at both.
- DISTRIBUTION: Most companies underestimate distribution, but Tesla took it so seriously that it decided to own the entire distribution chain. Other car companies are beholden to independent dealership where as Tesla sells and services its vehicles in its own stores. In this way Tesla affords control over the customer experience, strengthens Tesla’s brand, and saves the company money in the long run.
- DURABILITY: Tesla has a head start and it’s moving faster than anyone else. A coveted brand is the clearest sign of Tesla’s breakthrough: a car is one of the biggest purchasing decisions that people ever make, and consumer’s trust in that category is hard to win.
- SECRETS: Tesla knew that fashion drove interest in cleantech. Rich people essentially wanted to appear ‘green’, even if it meant driving a boxy Prius or clunky Honda insight. So, Tesla decided to build cars that made drivers look cool and it built a unique brand around the secret that cleantech was even more of a social phenomenon than an environmental imperative.
On top of these, Tesla’s strategy involves headline-grabbing moves like launching the Cybertruck or the Roadster 2.0 and making on its core vehicles, the models S, X, 3, and Y. When Tesla launched the Cybertruck, within a month they received 200,000 preorders for the new vehicle. Compare that to the Ford-150, the world’s best-selling car in 2018, which sold just over 1 million vehicles that year.
Tesla has developed a fascinating multi-pronged strategy for fundamentally changing an industry. And its growth is not going to slow down anytime soon.