Businessmodel of Tesla Motors

Customer Segments

Tesla Motors has a mass market business model, with no significant differentiation between customer segments. The company targets its offering at any consumer who wants an electric car.

Value Proposition

Tesla offers five primary value propositions: innovation, customization, convenience, risk reduction, and brand/status.

The company embraced innovation from the beginning. It has introduced a number of industry firsts, including the world’s first premium electric sedan (Model S) and the world’s fastest four-door production car (the P85D, which can accelerate from 0 to 60 mph in 3.2 seconds).

The company enables customization by allowing buyers to personalize the features of their car when making an order. Specific areas with options include car speed, sound system, and interior materials.

The company offers convenience by making its products easy to use. Car owners can charge their vehicles anywhere there is an outlet – all they have to do is plug in. Tesla also maintains the Tesla Supercharger Network, a network of charging stations strategically placed along well-traveled highways. Each station has between four and 10 Superchargers, and full charging takes about 30 minutes. As of 2016 there are 705 stations across North America, Europe, and Asia with 4,359 Superchargers. Lastly, the company is also working with various hospitality locations such as hotels and restaurants to expand the adoption of wall connectors that can be used by patrons to charge their vehicles. As of December 2015, more than 1,800 locations had over 3,100 connectors installed.

The company reduces risk by maintaining high safety standards. Its Model S features an electric drivetrain that rests under the car’s aluminum occupant cell in its own subframe. This positioning lowers the car’s center of gravity, which enhances handling and reduces rollover risk. Eight airbags protect occupants and the high voltage power source instantly disconnects in case of an accident.

The company has established a powerful brand due to its success. It has over 50,000 vehicles on the road globally and has sold over 140,000 cars since its inception. Also, the Model S ranks as the second best-selling plug-in car of all time after the Nissan Leaf, and was the top-selling plug-in vehicle in 2015. Lastly, the Model S was selected as 2013 “Car of the Year“ by Motor Trend.

Channels

Tesla’s main channel is its website, through which it acquires most customers. It also sells products through a network of over 208 company-owned stores, galleries, and “Service Plus” facilities in major metropolitan markets. The company promotes its offering through its social media pages.

Customer Relationships

Tesla’s customer relationship is primarily of a personal assistance nature. The company assists customers in the following ways:

• Vehicle Services – When a customer’s car is delivered, a Delivery Experience Specialist provides care advice to the new owner. Also, Tesla provides repair and maintenance services for its vehicles at its company-owned service centers. Furthermore, it maintains Tesla Rangers, a mobile team that can perform services for the car from a customer’s residence or other remote location. Service is provided as part of its Limited Warranty and maintenance/extended service plans.
• Financial Services – The company provides leases and loans for its vehicles largely through financial institutions. It also provides financing arrangements directly through its local subsidiaries. Despite this orientation, there is a self-service component. The company’s website features video walkthroughs and answers to frequently asked questions. There is also a community element in the form of a peer forum where customers can receive advice.

Key Activities

Tesla Motors’ business model entails designing, developing, and manufacturing its vehicles and energy storage products for its customers.

Key Partners

Tesla’s cars use more than 3,000 purchased parts, which it purchases from more than 350 suppliers worldwide. The company maintains a portal through which suppliers can obtain useful information.

Key Resources

Tesla’s main resource is its intellectual property, namely its electric powertrain, which consists of of its battery pack, motor, gearbox, power electronics, and control software.

It depends on its engineering staff to design, develop, and manufacture its products, its salespeople to sell them, and its customer service staff to provide support.

The company manufactures its offerings at its facilities in Lathrop and Fremont in California; Tilburg, Netherlands; and its Gigafactory in Reno, Nevada.

Cost Structure

Tesla has a value-driven structure, aiming to provide a premium proposition through significant personal service and frequent product enhancements.

Its biggest cost driver is cost of revenues, a variable expense that includes costs of automotive revenues (material and labor costs, direct parts, manufacturing overhead, and shipping/logistics costs) and cost of service revenues. Other major drivers are in the areas of sales/administration and research/development, both fixed costs.

Revenue Streams

Tesla has two revenue streams:

• Automotive Revenues – Revenues generated from the sales of Tesla’s vehicles.
• Service and Other Revenues – Revenues generated from maintenance and repair services, merchandise sales of electric vehicle powertrain components and systems to other manufacturers,  Tesla Energy products, sales of pre-owned Tesla vehicles, and net sales of non-Tesla vehicle trade-ins.