Telsa Motors Repositions for the Future

Deakin email address: asidh@deakin.edu.au

Tesla Motors – Introduction

Tesla Motors was founded in 2003 by a group of engineers in Silicon Valley, USA. Tesla engineers, builds and sells premium electric motor vehicles which generate instant torque, incredible power and zero emissions.

In 2012, Tesla launched Model S, the world’s first premium electric sedan. The Model S was built from the ground up to be 100% electric ( http://www.teslamotors. com /about). The cheapest variant of the Model S retails at USD 73,000 in the USA, serving the higher end of the luxury car segment.

Prior to the introduction of the Model 3, Tesla adopted a strategy of niche marketing, (Iacobucci 2013, p. 28). Tesla had historically targeted a very narrow segment in the motor vehicle industry; in that Tesla served consumers with very high disposable incomes that sought environmentally sustainable electric vehicles. The narrow segment that Tesla served is evident from the fact that there are currently, in 2016, only about 50,000 Tesla vehicles on the road worldwide (www.teslamotors.com /about) even tough Tesla was founded in 2003.

Model 3’s New Targeted Segment – The ‘Mass Market’?

Tesla Motors recent Model 3 unveiling event on 31st March 2016 carried the headline of ‘accelerate the world’s transition to sustainable energy’  (https://vimeo.com/161138986). By 7th April 2016 there were 325,000 pre-orders for the new Model 3 from across the globe (www.nytimes. com /2016/04/08).

According to Tesla, the Model 3 is Tesla’s first ‘mass-market affordable vehicle’ with zero-emissions priced at USD 35,000 (www.teslamotors.com). Though by 7th April 2016 there were 325,000 orders for the Model 3, the price tag of USD 35,000 in the USA market tends to attract consumers at the entry-level of the luxury car market rather than the ‘mass-market’ that Tesla is pushing in its marketing. It needs to be noted that there are observers that hold the view that ‘luxury today is neither a necessity nor necessarily expensive. It can be mass market’ (Yeoman & McMahon-Beattie 2005, p.321).

Segmentation of car buyers in terms of their disposable income is a significant consideration (Iacobucci 2013, p. 29) The BMW 3 series (www.bmwusa.com) and Mercedes-Benz C-Class (www.mbusa.com/ mercedes) entry-level sedans retail between USD 33,000 to USD 40,000. The Tesla Model 3 is being advertised at USD 35,000 and is aimed at the entry-level of the luxury car market in the USA.

The other important segmentation base that is relevant for Tesla in its mission to accelerate the world’s transition to sustainable transport’  (www.teslamotors.com/about) relates to consumers psychological traits (Iacobucci 2013, p. 30) with respect to their attitudes towards environmental sustainability. The Model 3 is being marketed as a long range electric vehicle with performance set to match or exceed the BMW and Mercedes-Benz automobiles in the USD 33,000 to USD 40,000 price range. The Model 3 has been positioned to be both eco-friendly and a high performance vehicle, accelerating from 0 to 60 mph in under 6 seconds. Tesla is targeting eco-friendly consumers who may fall within the lower end of the luxury car market segment. These car buyers may be willing to forgo the ‘purr’ of an engine and switch to a no emissions, high performance vehicle. With a growing global middle class, driven by higher education and disposable income in China and India, luxury can be mass marketed (Yeoman & McMahon-Beattie 2005, p.321).

The New Tesla Motors

Tesla is continuing to target the electric car segment within the motor vehicle industry; with the exception that is now targeting a larger range of that segment.

Tesla is pursuing a depth strategy (Iacobucci 2013, p. 38) of serving a larger range of the electric car segment by introducing a mid-priced electric vehicle. Tesla’s previous models were only available at significant premiums.

The targeted segment is expected to grow considerably due to increasing consumer awareness of environmental sustainability. The segment is also expected to realise profit growth from lower costs of producing electric car batteries due to economies of scale from increasing sales volume.

Tesla has the resources and technological advantages to sustain competitive advantage over its competitors due to Tesla’s significant research and development in electric vehicles since 2003.

References:

Iacobucci, D 2013, Marketing Management (MM4), Student Edition, South-Western, Cengage Learning, Mason, Ohio.

Yeoman, I & McMahon-Beattie, U 2005, ‘Luxury Markets and Premium Pricing’, Journal of Revenue and Pricing Management, vol. 4, no.4, pp. 319-328, doi:10.1057/palgrave.rpm.5170155

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