Tesla, a new kid in town

Going green is hot, companies and consumers place more emphasis on being environmental-friendly than ever before. One of the industries that is a main target of the ‘going green’ campaign is the automobile industry, one of the oldest industries. This industry is ruled by big players such as Toyota, VAG (e.g. Volkswagen, Audi) and General Motors. These companies have come up with several hybrid cars throughout the years, as well as partial electric cars. Surprisingly, the step towards 100% electric cars seems to be approached in a conservative manner.

As probably most of you know, Tesla Motors is one of the companies that pursues the fully electric dream. Tesla’s CEO Elon Musk is determined to disrupt the automobile industry, by being a successful fully electric car manufacturer. In 2008 Tesla introduced their first model, the Tesla Roadster, which was a high-class electric sportscar. Hereafter they introduced the Model S, their primary model at this moment which can be called a huge success, as a prize winning car in numerous rankings (Automobilemag, 2013). In the coming months their SUV, the Model X, will be released.

What is more interesting however, is the business idea that is behind Tesla. This is an important point where Tesla differentiates themselves from other car manufacturers, and especially from those (electric car) start-ups that didn’t manage to enter the automobile industry with success. Tesla has a so-called ‘three-stage strategy’ according to Elon Musk. The first stage was offering a car at a low volume, for a high price. This car was the Tesla Roadster. This initial car opened a new market in the automobile industry, a so-called blue ocean (Kim & Mauborgne, 2004), which is the fully electric car market. After that, Tesla moved on to the Tesla Model S, a mid-volume car offered at a medium price. This second stage of their strategy will be expanded by introducing the Model X in a few months, which will also be a mid-volume car at a medium price. Tesla entered a niche, the electric automobile market, and are now pushing forward to move out of this niche, by moving towards their third stage, offering a high-volume car at an affordable price (Musk, 2014). This enabled Tesla to enter the dominant automobile industry, with almost insurmountable barriers due to the dominance of current manufacturers, with success.

It is interesting to see what Elon Musk’s view is on the implementation of his three-stage strategy. Musk himself said that the Tesla Roadster was required in order to gain experience in the field of electric cars, but more importantly, to create enough buzz around the concept in order to gain funding and to create a hype. As we can all see, this plan is a success so far. Tesla is taken seriously by the automobile industry, as companies such as Toyota, Audi, BMW, Mercedes, and Volvo are more and more focussing on electric vehicles.

As Tesla can be called a succes story so far, my first thoughts are:

• What does this mean for other (electric) automobile start-ups, will they follow a similar strategy as Tesla did?
• What will Tesla’s impact be on the automobile industry, in means of speeding up the electrification process?
• And at last, where will Tesla end up? Will it become one of the biggest players in the automobile industry?

Personally I think that Tesla has opened the door for other start-ups with their creative approach towards the automobile industry. Not saying that the market will now be flooded with electric vehicle brands, but Tesla has proven that it is possible to enter this industry as a stand-alone fully electric vehicle manufacturer. Therefore I believe that Tesla’s impact is disruptive to say the least, traditional car manufacturers have now seen the real possibilities of electric driving. I won’t be surprised if Tesla will be among the biggest players in the industry in 10-15 years time.

So what do you think? Will Tesla disrupt the automobile industry? And has it opened up doors for many more (electric) car manufacturers to enter the industry, due to Tesla’s three-stage strategy?

Sources:

http://www.automobilemag.com/features/awards/1301_2013_automobile_of_the_year_tesla_model_s/

http://www.cbsnews.com/news/elon-musk-says-tesla-is-following-his-master-plan/

https://en.wikipedia.org/wiki/Tesla_Motors