How Has Tesla Revolutionized the Automotive Market
Jan 19 2023

Tesla’s expansion narrative is not your typical one. It serves as evidence of what a start-up can do with the right amount of capital and executive direction. Tesla should not now be categorized as a start-up business. One of the most well-known car businesses in the world right now is Tesla. Additionally, it is the world’s most valuable automobile manufacturer.

Tesla currently has a total market value of more than $1 trillion dollars! When put into context, this statistic is even more impressive. Of all the automakers, Tesla by far has the highest market capitalization. The aggregate market value of the following 10 automotive goliaths, including Ford, General Motors, Volkswagen, Honda, BMW, etc., is close to $1 trillion. Given that conventional automakers have been for more than a century, this is incredible. Contrarily, Tesla was established less than twenty years ago.

When Tesla was still a startup, it caught the interest of investors like Elon Musk, who is now known as the company’s face. It is one of the rare businesses that has outgrown the competitors in its market.

We’ll examine the Tesla model in more detail in this piece. We will look to comprehend and elucidate what makes Tesla the most valuable automaker globally.

Low Sales: When one takes into account how few cars Tesla sells, it is all the more amazing that its worth is so high. Nearly one million Tesla vehicles will be made and sold in 2021. Even though one million might seem like a large number, it is actually quite small when compared to the total number of automobiles produced by the world’s auto industry. Nearly 1% of the market is accounted for by Tesla.

High-Profit Margin: Tesla has succeeded in building a brand that appeals to customers. This is demonstrated by the fact that Tesla is able to sell many vehicles while having a significant profit margin. Gross margins of 15% to 20% are often generated by high-end vehicle manufacturers. However, compared to traditional automakers, Tesla’s profit margin is nearly twice as high at over 30%.

Tesla’s ability to maintain its sales even with a higher price tag says a lot about the company’s marketing skills and knowledge to connect with customers. When we consider that Tesla does not invest any money in marketing its products, in contrast to its rivals who do, this fact is all the more impressive.

Tesla has several sources of income and a wide range of products. One may think that Tesla is a player in a variety of sectors based on the product lineup it offers. For instance, the business both manufactures and services automobiles. The company’s primary source of income comes from this. Tesla, however, operates in the electric energy sector. As a result, they also provide ways to power a home using solar energy.

Solar panels made by Tesla are fixed to the roof and aid in the production of electricity. Tesla has also developed a novel product called a power wall. Solar energy is stored in power walls so that it can be used on days when there is not enough energy production.

Regulatory Credits:

Regulatory credits are a significant additional income stream for Tesla. Governments all across the globe offer financial incentives to businesses that make electric vehicles. Tesla is able to get all of these regulatory credits since it only makes electric vehicles. There are several more automakers who don’t make enough green vehicles. They must thus pay Tesla the market price for these regulatory credits. Tesla can make a 100% profit when they sell these credits on the open market because they receive them for nothing!

Research and development priorities Like many other start-ups in its time, Tesla isn’t in a hurry to turn a profit. Despite the fact that Tesla was a very valuable brand in the past as well, the business didn’t start making money until 2019! The first year that Tesla turned a profit was 2020.

In comparison to its rivals, Tesla is renowned for investing three to four times as much in R&D. The money Tesla is investing in R&D is what is putting it ahead of its rivals. Tesla frequently debuts ground-breaking innovations like self-driving cars. As a result, both social media and traditional media outlets are compelled to cover their automobiles. Long-term sales growth for the business is aided by this free word-of-mouth promotion.

Start with Expensive Cars:

Tesla chose to approach the market for electronic vehicles in a unique way. The majority of businesses attempted to manufacture more affordable electric vehicles but were unable to do so due to the high cost of production. On the basis of price, businesses were unable to compete with fossil fuel-powered vehicles. Tesla entered the market using a different strategy.

The costly automobile market was where Tesla initially popularised electric vehicles. Research and development are being funded with the proceeds from these pricey cars in order to bring down the cost of entry-level cars. Tesla will do it with a strong value offer once it penetrates the lowest tiers of the market. The popularity of electric automobiles among the general public has also increased thanks to Tesla’s success in the high-end auto industry.

The simple truth is that Tesla has fundamentally transformed a dated sector using a mix of technology and economic savvy. It is unquestionably a model that other startups can follow.

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