TESLA. Expensive toy or a smart investment?

CEO

Behind the wheel of Tesla is a legendary figure Elon Musk Reeve (Tesla Motors, 2016). He is the founder of the PayPal, which was raised up against the opinion of the Board of Directors. Elon Musk knows that technological revolution is not the most important business step, more important is to find customer and the way to sell to them.

Elon-Musk-net-worth.pngTeslas’ Pricing Policy

Tesla Motors announced value of the Model S electric car in Asia – $ 121,400, which is 50% more expensive than in US. Such pricing policy of the American automaker can turn a buyer looks, as it is considered that inflated the cost of products can guarantee the quality, and most importantly – the prestige and luxury. Now Tesla Motors want to destroy this myth.

Tesla Motors will sell their electric vehicles on a “transparent price.” For example, the cost of the electric vehicle Model S includes only “unavoidable” taxes, transportation costs and the cost of the car itself. The Tesla Motors say that if they would follow the standard practice of the market, it would overstate the price in half. Yadav (2014) states that the popular Chinese QQ.com website conducted a survey of readers, which was attended by over 80 000 people. The survey showed that 90 percent of consumers in China support Tesla Motors.

Tesla-Trade-Data-Market-Share-Pie-Chart.jpg

US automakers often overestimate the cost. For example, the premium Mercedes-Benz SLS AMG car worth $ 509,000 in China, which is 150% above its starting price in the US, Audi TT Coupe – $ 85,800, which is twice more than in America.

While other automakers offer regular discounts to attract buyers, Tesla Motors is the first one that makes a big effort to the cost of cars will be like on the European markets, transforming the “transparency” of the price in a neat marketing ploy. Therefore, Tesla Motors company strategy can destroy pricing policy for imported products. “Price transparency” of Tesla can help them stand out from the competition.

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Tesla. Worth it or Not?

Biscontini (2015) points out that manufacturers and retailers are gradually beginning to realize the ambitions of Tesla Motors policy. And it pleases not all of them. By the standards of major car brands Tesla is still expensive car, which is not deserve too much attention from potential competitors and regular customers (DYER, GREGERSEN & FURR 2015). It sounds logical. The company is young, turnover is still relatively low. For example, the leader of sales in 2014 Volkswagen has earned more than 200 billion Euros, the outsider rating Mitsubishi – more than 15 billion Euros, when Tesla Motors – only $ 3.2 billion and this against the background of increased operating losses: in 2013 Tesla shareholders missed $ 61 million, and $ 186 million in 2014 (Tesla Motors 2014).

tesla-market-copy

Dealer Association aware of these figures. Nevertheless, they believe Tesla threat and are trying to block the direct sales of electric cars, not to create dangerous precedents work without intermediaries (Hardman, Shiu & Steinberger-Wilckens 2014).

In addition, the public institutions and the government also try to prevent the success. For example, in France for transition from conventional to electric car government charges 10000 Euro. This are not the best circumstances when you think to update your car to Tesla with potential free travel and an almost complete absence of maintenance costs!

Prospection

In the long term the Tesla Motors may have a great success and rise in the number of buyers, if they would be able to preserve and develop the trend. But reputation and price are the decisive factor. People like the idea of eco-friendly electric vehicle. Even those who have never seen a single car, and have not going to buy it, think that it is a great project, and treat him with sympathy. Elon Musk wants to finish the work of Nikola Tesla – connect the auto industry to electricity.

Perhaps it’s still work. And as soon as a choice between “ordinary” machine and electric vehicles will be simple and accessible – what do you prefer?

References:

Biscontini, T 2015, ‘Tesla Motors, Inc’, Salem Press Encyclopedia, retrieved 30 April 2016, Research Starters, EBSCOhost.

DYER, J, GREGERSEN, H, & FURR, N 2015, ‘TESLA’S SECRET FORMULA. (cover story)’, Forbes, 196, 3, pp. 90-118, retrieved 29 2016, Business Source Complete, EBSCOhost.

Hardman, S, Shiu, E, & Steinberger-Wilckens, R 2014, ‘Changing the fate of Fuel Cell Vehicles: Can lessons be learnt from Tesla Motors?’, International Journal Of Hydrogen Energy, retrieved 28 April 2016, ScienceDirect, EBSCOhost.

Tesla Motors 2014, Annual report for the 2014 fiscal year, Tesla Motors, retrieved 29 April 2016, <http://ir.teslamotors.com/secfiling.cfm?filingid=1564590-15-1031&cik=1318605&gt;.

Tesla Motors 2016, Tesla’s mission is to accelerate the world’s transition to sustainable energy, Tesla Motors, retrieved 29 April 2016, <https://www.teslamotors.com/en_AU/about&gt;.

Yadav, K 2014, Tesla in China: Elon Musk’s Litmus Test, Cheung Kong Graduate School of Business, retrieved 28 April 2016, <http://knowledge.ckgsb.edu.cn/2014/04/02/marketing/tesla-in-china-elon-musks-litmus-test/&gt;.

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