Coventry University London Campus

Subject: Marketing in a Global Age

Subject Code: M003LON

Title: Individual Marketing Report –

Tesla Motors in The USA

Name: Mohamed Nishal Kamarudheen

Student ID: 6335737

Tutor: Dr. Joshie Juggessur

Submission Date: 29th June 2015
Word Count: 2,478
Executive Summary:

Tesla Motors has established themselves to be the pioneer in fully Electric Motor car sector.
With their leading innovation strategy, Tesla was able to enter the market with their Roadster
models. The strategy that Tesla follows has enabled them to expand into the luxury premium
category. This report analyses Tesla’s Marketing strategies and programs. The introduction
gives a brief of Tesla Motor’s history and how it’s linked to green marketing. Since all the
models of Tesla follow in the green marketing category, this report will be giving a brief on
all the models, but a detailed description on the Model S.
Post the introduction; the situational analysis is performed on Tesla Motors. The
SWOT/TOWS gives a brief description about the internal and external factors affecting the
company. The TOWS explains that the company strengths can be used in a way to exploit the
opportunities and minimize the threats. Similarly, a PESTEL analysis gives an idea about
Tesla Motor’s external evaluation. A critical evaluation of the Porters five forces is then
shown that explains about the factors that affect the business. For Tesla Motors, the threat of
new entrants is low since the initial investment is very high. The threat of substitutes remains
moderate since this is the pioneer in its kind. People are still inclined towards the traditional
methods. The bargaining power of buyers remains low since there is a high demand for the
Model S. In terms of supplier power, it’s moderately low since there are various suppliers for
battery and other components used for their vehicles. The intensity of rivalry is high.
However, there are no rivals in the same category as Tesla Motors. The rivalry is faced by
other brands in the same efficient cars category. A Product Life Cycle is shown which
explains that the Model S is in the growth category. A competitor analysis is provided along
with their USP’s and competencies. In terms of Market Strategies, A clear idea of the
segmentation, target markets, and positioning map is shown. The Marketing Mix analyses the
7P’s – Product, Price, Place, Process, People, Physical Evidence and Promotion. This will
give an understanding of how and where Tesla is currently in the market. The Control and
Evaluation show where the company is based on the objectives that they had set. On a
complete note, a full analysis of Tesla Motor is done.

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Table of Contents:
Introduction ………………………………………………………………………………… 3
Situation Analysis …………………………………………………………………………. 4
SWOT/TOWS Analysis …………………………………………………………… 4
PESTEL ……………………………………………………………………………. 5
Porter’s Five Forces ……………………………………………………………….. 6
PLC ……………………………………………………………………………….. 7
Competitors ………………………………………………………………………... 8
USP, Competencies ………………………………………………………………... 8
Segmentation, Targeting, and Positioning …………………………………………………. 8
Market Strategies …………………………………………………………………………..10
Objectives ………………………………………………………………………………….10
Marketing Programs ………………………………………………………………………..11
Product ……………………………………………………………………………..11
Price ………………………………………………………………………………..12
Promotion ………………………………………………………………………….12
Place ………………………………………………………………………………..12
Process ……………………………………………………………………………..13
Physical Evidence ………………………………………………………………….13
People ………………………………………………………………………...……14
Control and Evaluation ……………………………………………………………………14
Conclusion …………………………………………………………………………………15
References ………………………………………………………………………………….16

Introduction:

Tesla Motors was founded in 2003 by a group of engineers who wanted to prove that Electric
cars could be much better than Gasoline-powered cars. It was built around the AC Induction
motors, an invention by Nikola Tesla, an inspiration for the company name (Tesla Motors
2015). In 2012, Tesla launched the Model S, the first premium electric sedan. It was named
Motor Trend’s 2013 Car of the Year and achieved a 5-star safety rating from the U.S.

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National Highway Traffic Safety Administration (Tesla Motors 2015). Green marketing is the
marketing of products that are presumed to be environmentally safe. (Kotler 2013). The
master plan of Tesla Motors according to the CEO Elon Musk is to build a sports car, use that
money to build an affordable car, use that money to make an affordable car, use that money to
make an even more affordable car and also provide zero emission electric power generation
options (Musk 2006). Tesla Motors launched 3 different models. The Tesla Roadster was
launched in 2006, Model S in 2008 and Model X in 2012 (Tesla Motors 2015). The Model S
was available for the public in 2012 and the Model X will be available by mid-2016. Model S.
Tesla provides their Powertrains to Daimler AG for their vehicles. They have also developeed
a powertrain for Toyota Motors to use with their fully electric RAV4 models. Panasonic
provides battery packs for Tesla Motors since October 2011. Tesla Motors can be found under
TSLA in NASDAQ and have a sales revenue of $3.2b. The company is worth more than $25
billion (Groom 2014)

Situation Analysis:

SWOT/TOWS Analysis:
The Model S is currently one of the quickest and most efficient cars on the market (Forbes
2013). Tesla possesses the First mover advantage with building the first fully electric car.
They have high profile customers including Arnold Schwarzenegger, George Clooney, and
Jay Leno (Ranker 2014). Tesla lacks the brand recognition like other competitors in the
industry. They have a limited product line, with only 3 models released as of 2015 (Tesla
Motors 2015). The prices of models are higher compared to its competitors (Schaal 2015).
The world is moving towards green technology everyday. People have realised that its time to
give back to the nature. Hence there is a growing opportunity for electric cars worldwide.
Improvements in the Battery and other quality components can boost the sales. Since they are
competing against gas combustion engines, which has been established 100 years ago; it will
take time to reach the optimal use of masses. Advancement of alternative fuelled hybrid cars
like hydrogen powered increases the threats for the electric car industry.

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 Strengths: Weaknesses:
Ø Highly Fuel Efficient Ø Low brand recognition
TOWS Matrix
Ø First mover advantage Ø Limited product line
Ø Strong R&D Dept. Ø Relatively high priced
Opportunities: SO: WO:
Ø Sustainable Being one of the most fuel- Outsourcing the production
technology efficient cars, they can expand line would decrease the price
Ø High scope for their markets internationally structure. Educating people
improvement and also focus on their own. about the importance of
Ø International environment-friendly vehicles.
Market Potential

Threats: ST: WT:

Ø Strong Since they have a strong R&D, Promote the product such that
Competition they could develop new the competition reduces.
Ø Emergence of technologies that are cheaper.
Hybrid cars

PESTEL Analysis:

Political: The US government has introduced energy loan programs for these electric cars to
promote the sustainable technology (Department of Energy 2014). This brought about interest
among lots of vehicle manufacturers.

Economic: The cost of operating a vehicle varies everyday due to many factors, mainly fuel
costs and insurance (BBC News 2014). Hence, the demand for efficient cars increases
everyday.

Social: The main conversation these days is about the environment, carbon footprint,
pollution and global warming. The idea of having an electric car improves the social status of
a person. These days, the society judges people based on the car they own (Autospies.com
2008).
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Technological: Technology plays a major role in the current world. Fully electrical cars,
linking mobile phones to cars, automatic driving cars, voice activated cars and accident
prevention drives are just a few examples of technological advancements (Haveit-eu.org
2011)

Environmental: The growing awareness to climate change has been affecting the company’s
operation. Many car manufacturers have been facing pressure to produce eco-friendly or fuel
efficient cars in the current generation. The customers are learning everyday about the
pollution effects on the environment (Ypte.org.uk 2014).

Legal: The franchise laws in The US protect car dealers and create challenges to Tesla selling
its car directly to customers (Fisher 2014). Since Tesla follows a direct sale model, it is
difficult to cope with this challenge.

Porter’s Five Forces Model:

The threat of new entrants Ø High Capital Investment required

Ø Support from government provided
Ø Tesla themselves faced a lot of issues
The threat of substitutes Ø Mass transportation like trains, buses
are available
Ø Gasoline engine powered cars
Ø Hydrogen, Biofuel, Hybrid cars
The bargaining power of buyers Ø Since demand is high, the bargaining
power is low
The bargaining power of suppliers Ø Battery companies – low, since Tesla
has various suppliers
Ø Chassis – High, no alternative brand
The intensity of rivalry Ø In Fully Electric Vehicle category –
No Rivals since Tesla is the pioneer
Ø Rivalry faced from other competitors
like Toyota Prius, Nissan Leaf, etc.

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Product Life Cycle:

Ø The PLC is similar to every automobile industry. In the introduction stage, the company
promotes the product offerings and what makes it stand out. It moves on to the growth
stage where the advertising is done for a wider audience. Test-drives and other
promotions are done at this stage. The maturity stage brings slower growth and high
competition. At the decline stage, the interest decreases since there would be newer
models and the company starts giving discounts and offers to make way for their newer
models (Capozzi 2011).
Ø The Model S is currently in its growth stage. Even though it has received various
recognitions and awards, Tesla is still investing in upgrading the models to make this an
even better car (LeBeau 2015).

Competitors:
Since Tesla is the only fully electric sports/luxury car, it does not face much competition in its
category. However, there are various hybrid cars that give fierce competition to Tesla. Toyota
Prius, Chevrolet Volt, Honda Civic Hybrid and Smart Car are some of the competitors that
Tesla has in the efficient/electric cars category.

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USP’s and Competencies: Tesla is the first company to offer a fully electric luxury/sports
car. The tagline “Burn rubber, not gasoline” itself proves their USP (Tesla Motors Club
2013). The core competencies of their vehicles including the Model S are the power train and
vehicle engineering. The electric powertrain consists of the battery pack, power electronics,
motor, gearbox and the control software that enables the components to operate as a system
(Tesla Motors Annual Report 2014). The powertrain is very compact and it contains far fewer
parts than the internal combustion engines.
Tesla is committed to being fully electric. Tesla’s technology offers the most efficient path for
a sustainable energy future.

Market Segmentation, Targeting and Positioning:

Segmentation can be separated based on consumer characteristics.

Geographic: Places with high oil prices is a very good market for Tesla. Also, places that
support environment friendly policies are an added advantage.
Demographic: Individuals who are looking for premium luxury cars with the added benefits
of a being fully electric. Model S mainly targets the upper middle class, especially to someone
who can afford it (Tesla Motors 2015).
Psychographic: Surveys can be conducted to see if people are satisfied with their current cars
and are willing to move this new technology. This is a good way of marketing the Model S
also.

Target Market: Since the Model S is priced at around $70,000; the target customers are
successful business executives and entrepreneurs who are city dwellers and are also tech
savvy and eco friendly. Individuals aged from mid 20’s to early 40’s would be the ideal target
audience (Tesla Motors 2015).

Positioning:
Tesla Motors, Model S falls in the premium luxury car with an added advantage of being fully
electric. It’s priced high compared to its competitors but it has the advantage of high quality.

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The elegant design of the Model S puts it in the category along with BMW, Mercedes Benz,
Audi and Lexus.

Tesla falls under the Premium Luxury Electric Cars. The price is comparatively high but there
is no compromise on the quality.

Positioning based on Company:

Source: Tesla Motors

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Marketing Strategies:
Tesla Motors have a different marketing strategy compared to traditional ones. They don’t
have any dealers or commission based sales. The Model S is built to order; there is no
inventory for the cars. You can’t test drive a Tesla without a deposit of $5000, and you may
have to wait for months to get your car after you place the order (Tesla Annual Report 2014).
To date, Tesla doesn’t have much experience in any marketing activities. They have relied
primarily on the Internet, word of mouth and trade shows. They have decided to increase their
advertising expenses by using traditional media ads (Tesla Annual Report 2014).

Objectives:
According to the Elon Musk “ Our goal is to accelerate the advent of sustainable transport
by bringing compelling mass market electric cars to market as soon as possible.” (Musk
2013). The principle marketing objectives are as follows:
Ø Generate demand for the vehicles and pass the leads to the sales teams (Tesla Annual
Report 2014)
Ø Build long-term brand awareness and manage corporate reputation (Tesla Annual
Report 2014)
Ø Manage existing customer base to create loyalty (Tesla Annual Report 2014)
Ø Enable customer input into the product development process (Tesla Annual Report
2014)

The Master Plan according to the CEO, Elon Musk is the following:
Ø Build a sports car
Ø Use that money to build an affordable car
Ø Use that money to build an even more affordable car
Ø While doing above, also provide zero emission electric power generation options
(Tesla Blog 2006)

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Marketing Programs:

Product: Tesla Motors posses 3 different models: Roadster, Model S and Model X. The
Roadster was the first model released in 2006 and sold over 2400 cars up to September 2012
(Tesla Annual Report 2012). This was a sports model and could reach 0-60mph in 3.7
seconds. The Model S was launched in 2012, a premium luxury sedan which was a great
success. It received the highest safety rating in America (Tesla Motors 2015) and has various
new features like Auto Pilot and Dual motor all wheel drive. . The car has excellent handling,
is very quiet, and is built purposely to be extremely aerodynamic. The Model X is a seven-
seat sports SUV model to be launched in 2016 (Tesla Motors 2015). Every Tesla model is
built around the driver. They build a connection between the driver, car and the environment
for the best experience.

Tesla Roadster (Tesla Motors 2015)

Tesla Model S (Tesla Motors 2015)

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 Tesla Model X (Tesla Motors 2015)

Price: The Roadster was priced at $101,500 and has now discontinued the production. The
Model S currently launched 3 different variants of the Model S namely 70D, 85D and P85D.
The 70D starts from $75,000 for the basic model. The Model S 85D starts from $85,000 and
the P85D starts from $105,000. The P85D has a double motor and touches 0-60mph in 3.1
seconds. The Model S currently has a leasing option also available on the website as low as
$1000/mo. Tesla also has used cars portal on their website (Tesla Motors 2015).

Promotion: Tesla Motors currently uses the following for promoting their cars:
Ø Social Media
Ø Word of mouth
Ø Website
Ø Trade Auto shows
Ø Customer events
Ø Press release
Ø Celebrities
Tesla Motors revealed that they would invest more into other marketing and promotional
activities including traditional media ads.

Place: Tesla has a different approach in sales. Tesla sells vehicles over the Internet and at
Tesla-owned stores. They currently have Tesla stores in 31 cities worldwide. Tesla plans to
have a total of 50 stores, which could increase the sales of Model S. They do not have
distribution or dealership centers. Tesla has small outlets inside malls that encourage people
to come have a look. Many sales have come from people who had zero interest in buying the

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car, until they saw Tesla’s showroom (Reynolds 2013). Apart from these, the car can be
purchased online from the Tesla homepage.

Tesla Store in Westfield Mall, London

Process: Unlike any other traditional automobile sales process, Tesla follows a different
approach. They do not have any car dealers, instead it’s on first come-first serve basis. People
interested in buying the Tesla, can either place an order online or go to the small showrooms
in the malls. Once the order is placed, the manufacturing starts. Tesla doesn’t believe in
having an inventory of cars. They are built to order (Reynolds 2013).

Physical Evidence: The Model S has many features that stand out compared to any other
luxury cars in the industry. The autopilot driving system is one of the highlights of the car. It
has 4 different types of sensors that can analyze the road and drive on its own. The zero
profile door handles is another feature. When a key is close to the proximity, the door handles
automatically extend and when not in use, they retract into the body of the car increasing the
aero dynamics (Tesla Motors 2015).

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People: Tesla Motors expects total commitment, they push their employees beyond their
limits. Nothing less is acceptable. The company offers good benefits in terms of health
insurance and other incentives. Tesla currently has over 2,000 employees and makes them
feel that they are part of something big, trying to change the world (Tesla Employee Reviews
2012).

Tesla Superchargers set up around USA (Tesla Motors 2015)

Control and Evaluation:

Tesla followed the master plan according to Elon Musk and achieved their targets.

Objectives Metrics
Build a Sports Car Ø Tesla Roadster, which was considerably expensive.
As of Dec 31, 2012, almost all of the remaining models
were sold from the inventory (Tesla Annual Report 2014).
Ø The Roadster was priced at about $101,500 and was
sold to almost 30 countries around the world (Tesla 2015).
Ø The production concluded in Jan 2012

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 Use that money to build an Ø The revenue generated from Tesla Roadster was
affordable car used to build an affordable car. Tesla exceeded the
customer expectations by building a premium luxury
model that was still in the affordable range.
Ø The Model S was launched in 2012, and with the
limited production capacity factory. Tesla was able to
produce 2300 vehicles in March 2013, 2100 in April 2013
and 1800 in June & July 2013. The prediction of sales as
per Elon Musk, for Q3 of 2013 is 7800 vehicles.
Ø The Model S pricing starts at $75,000 for the 70D
base model and goes up to $105,000 for the P85D high
end.
Use that money to build an Ø Tesla is currently developing the Model X and will
even more affordable car be available for the public in mid 2016 (Tesla 2015)
While doing above, also Ø Tesla was successful in delivering a zero emission,
provide zero emission fully electric vehicle.
electric power generation Ø Model S received various awards, including 2013
options Car of the Year (Time Magazine 2013) and World Green
Car award (Automobile Magazine 2013)

Conclusion:
After analysis the whole market and the company structure of Tesla Motors, it does seem like
the future of automobile industry. From the situational analysis and the critical evaluations
performed, Tesla explains where they stand in the market and where they have the potential to
grow. Being the pioneer in this fully electric sports car category, Tesla had the first mover
advantage. Their objectives were very simple and it clearly stated how they invest their
revenue back into the industry to make a cheaper car. Since other automobile companies are
positioning themselves to compete in the hybrid or electric car market, Tesla is likely to get
high competition in the market unless they distinguish themselves as the world’s premiere
electric car company. The brand awareness should be more so that people can clearly
understand the benefits of using an efficient vehicle with zero emissions. After receiving

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various awards for the Model S within 2 years of its launch, it is clear that people are
inclining towards an efficient car with no compromise on its performance. With little to no
direct advertising, Tesla has climbed their way into the market and the popularity is quickly
rising among the middle class individuals. Even though theirs sales have been relatively low,
their success has been fantastic. With the small factory that couldn’t accommodate such large
orders, Tesla managed to deliver their targets. They were also able to pay off their loan, and
they sold 100% of their production. With this initial success, they have the potential to grow
even further.

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