The value pricing policy of the company offering a self driving, zero emission car has been the most successful launch of any product in the history with a reservation of 325,000 pre orders in the first week of it’s launch for Model 3 ( Market Watch, April 2016). The small electric car made a big noise when launched at a base price of $35000 with more than 300,000 pre orders even when the car was unavailable for display ( The Verge, Jordan Golson, March, 2016).
From a high end product targeting luxurious and premium buyers with a pricing strategy of maximum profit , the company has come a long way to drop their prices and target the consumer concentrated market in order to survive ( The Verge, Jordan Golson, March, 2016).
Within one week of the launch of Model 3, Tesla has already taken $7.5 billion of pre order booking ( The Verge, Jordan Golson, March, 2016). Change in price has been a key driver in changing the preference of the customers to buy Tesla over other brands has been a big breakthrough for targeting the right segment.The falling oil prices has left the customers baffled. The falling oil prices is a big threat for the Electric vehicles as customers, in short run can choose fuel efficient cars costing them much cheaper irrespective of the environment.
After the change in the current global environments, the government support the idea of electric vehicle for a better environment. 55% of the total population is aware and support the idea of EV’s ( Forbes Asia, May 2016). The only potential buyers are concentrated in U.S and China due to the scarcity of charging stations across the world. Due to inconsistency in car insurances and maintenance cost, the customers are looking for better options in the prevailing market.
Being a pure electric vehicle, Tesla has no actual competitor in the group (the daily beast, 2016) but General motors has launched its first affordable electric vehicle that can give tough competition to Tesla. The electric vehicle industry also face tough competition from hybrid’s, fuel cell and clean diesel engine vehicles holding larger market shares.
As the company has adopted the price skimming strategy (Homburg, C., Totzek, D., Krämer, M. (2014) i.e lower price with new model; the company has to focus on the installing more battery stations throughout to gain popularity among people for a hassle free drive. Can motivate customers to purchase more high end models for experiencing free charging over the years. As Tesla holds the largest battery manufacturing plant that is the support system for the company to boost its sales and meet the high and increasing demand of people, they hold an edge over the competitors. Tesla can aim at becoming the leading manufacturer of lithium batteries and control the market by supplying it to the competitors.
Due to it’s optimist vision and approach, Tesla can overpower the current persisting problems and its competitors bringing in new upgraded models that have better battery life, can cover more distance and more charging stations for the customers to prefer over other brands and available options.
- Homburg, C., Totzek, D., Krämer, M. (2014) How price complexity takes its toll, Journal of Business Research, 67 (6)