What Tesla can teach us about competitive advantage?

Elon Musk Tesla

It was in the year 1884, the first practical electric car was created by Thomas Parker. The idea was to provide an alternative for short city trips targeted to women against the combustion engines. Later, the Ford Model T has become the first mass produced electric car. It used to cost $1750 in 1912, almost 3 times more than its regular variant. Slowly the abundance of oil was found and the pricing has made these cars disappear by 1935. But, no one would have known what the future will ask for. 

In 2003, Tesla Motors was established by Eberhard and Tarpenning, electrical and software engineers respectively. They successfully raised enough funding to build an Electric Sports car. Paypal Founder, Elon Musk was one of among those investors who funded the company with $30million and served as its chairman from 2004. In 2006, Tesla Motors released its first prototype, a fully electric Roadster with a range of 245 miles (394 km) on a single charge, which is unprecedented for an electric car during the times. It was also packed with performance that is paar equal to a regular sports car, a 0-60 mph under 4 secs. In 2008, they released the roadster which uses Lithium-ion batteries and planned to expand their product line into affordable electric cars for everyday use. Since then, the company also shifted gears at the right times to make use of Technology at a larger scale.

Every business that wishes to be a brand works on their competitive advantages as it contributes to higher prices, more customers, and brand loyalty and every brand we know has already established their competitive advantages. Tesla is one such brand with a plethora of competitive advantages. Tesla has established its brand image against other automakers in the US & the rest of the world. It concentrates on the segment of Electric vehicles that go the distance you can settle & offers the performance that makes you go bonkers.

Tesla is where it is, and has become the brand it is because of its clear vision. The world knows very well the future is of EVs. However, giant automakers GM, FCA, Toyota, Volkswagen, etc., only concentrated on the performance category, and only a little on the Hybrid range. That is where Tesla capitalized. It built cars for the future rather than the present. Since its Establishment in 2003, Tesla motors took almost 5years to launch their first car and today, Teslas offer performance that is no less than any hypercar.

Tesla hasn’t been ahead of the time. It has been around the EV industry a lot longer than its competitors, waiting for the market to make the shift. Every automaker has garnered millions of loyal fans so far. But, almost a cult-like following is what Tesla garners. Fans think Tesla is on the brink of changing the world for the better. No doubt, the personal brand of its founder Elon Musk has been the biggest evangelical here. Today, it enjoys brand recognition, word-of-mouth advertising, and a much more expansive charging (& supercharging) network due to its time in the market. It purely has got the first-mover advantage while its competitors have just begun the journey towards EVs.

Teslas are nearly 60% of electric vehicles sold in the US. Simple the reason, their cars go a lot more in a single charge, cheap to maintain and completely reliable as much as a regular Toyota. Tesla’s Model S has a range of 380 miles which is the best around the world, only to be followed by The Model 3 and Model X. Many people call Tesla, a battery company that sells cars. Well, that is how much they worked on their battery & chemical technology. It is the biggest EV battery producer than all the competitors combined. It has also cleverly used the concept of Economies of scale in reducing the cost of battery production besides updating their chemical technology from time-to-time. To some extent, it is also the quality maintained by their battery partner Panasonic cells. Do not get awestruck to know that you can power an average house in Asia with Tesla’s battery, Powerwall 2 that lasts 15 KiloWatt hours.

Tesla has also pioneered and introduced the most advanced autonomous driving feature-packed with performance. In October 2014, Tesla introduced the first version of the Autopilot driver-assist feature with Model S and had amassed roughly 2 billion miles of data through it, every inch of which  has strengthened its self-driving algorithm through machine learning. The data which Tesla avails of is way ahead of what has been existing with other automakers like GM & Daimler. 

The features Tesla offers with its 2020 models are so fancy & advanced. The company also promises regular software updates for the system through over-the-air and delivers as per. Alone in June 2020, Tesla provided 7software updates to its cars. It helped the company to be on top of the competition and made it the more Tech-Driven Automaker in the world. There’s also a decent debate on whether Tesla is an Automaker or a Tech Company.

With all that Tesla had done and achieved, it ticked all the principal strategies to have a strong competitive advantage.

  • Had their focus for the time ahead and worked on it. 
  • Have cleared the cost leadership strategy with the help of economies of scale on their battery production & technology.
  • They made a clear differentiation of themselves from every other automaker and the competitors.

However, the competition for Tesla has started to step up a little more. Giant Automaker VW group has come so close to Tesla with Porsche Taycan S. Premium brands Audi & Mercedes launched their consumer-focused EVs. Lucid Motors plans to crack against Tesla Model S. And Rivian eyeing on Tesla cybertruck’s pickup EV market. Yet, Tesla has got its competitive edge over them and thus, it teaches something critical to be known for a (tech) startup.

  • Timing for a startup is crucial: Tesla might be a little early but has got ample time for the R&D. It’s okay to be a little early in the market but play it right with proper understanding of the segment.
  • Vision to build the right product: Just making an EV may not have added to Tesla’s image. They analyzed the requirement of the market as per the times well. Tesla’s vision was so right on the point. They knew what they wanted to build and where to put their money. Tesla also got the right partners to sell the best product because they found who delivers the best.
  • Build for the future:  AI/ML and battery technologies available in 2014 were bland. But, Tesla knew what was coming. They made investor deals that are driven by their futuristic & tech inventions.
  • Do more: A fancy feature like karaoke is not at all standard for any vehicle in the world. But Tesla makes it. It adds to their brand differentiation and recognition, just as we keep talking about it.
  • Power of Technology: EVs are simple but only need improved range & performance. But Tesla makes beyond EVs. Their cars come with best in class AI/ML and battery technology. 

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