Updated September 10, 2022

Tesla Motors Business Model

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Tesla Motors Business Model essay
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The Firm

Mission Statement of Tesla Motors, Inc

Tesla’s goal is to develop a sustainable transportation means through mass marketing of electric cars and to introduce them to the market once they are available. Their first product was a sports car, a decision taken by the company to manufacture a competitive car as their first product due to the expenses involved in producing their first product and to have best chance to compete in the automotive industry lead by gasoline alternatives. This is not to be mistaken as tesla’s intent to serve rich people with sports car which why a three-step master plan was discussed. The mission statement of tesla was “to accelerate the world’s transition to sustainable transport”. However, in the year 2016, the mission statement was changed to “to accelerate the world’s transition to sustainable energy” under Elon Musk’s leadership (Rowland, 2018).

This new mission statement of Tesla compliments with their current strategic business objective. This can be confirmed from the fact that Tesla has evolved form a company working on electric vehicles, especially automobiles, to a company which is currently focusing on renewable energy production via batteries, solar cells, and entered in the business of providing renewable energy solutions which are profitable. The mission statement of tesla drives forward their business practices and strategic decisions and they strive to achieve business effectiveness (Rowland, 2018).

Vision Statement of Tesla Motors, Inc

Similar to the mission statement, Tesla’s vision statement represents their electric automotive manufacturing and sustainable energy business practices. Tesla’s vision statement is “to create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles”. The focus is clearly on renewable and sustainable energy. Tesla views electrical vehicle market as a chance to make inroads into the growth of renewable energy avenues and there by facilitate it around the globe. Per their corporate vision statement, Tesla wants to be the industry’s most compelling company. They like to excel in the business and want to be the leaders. They strive to achieve this by integrating and introducing sophisticated technologies in their electric vehicle and other renewable energy products (Rowland, 2018).

Tesla, as a car company, focuses on design and manufacturing of new cars and this is asserted by their corporate vision. They are willing to be the 21st century company based on current and future needs. Environmental concerns are addressed by Tesla and their goal is also to conserve the environment. Their global goal is to expand to as many countries as possible and they are actively working towards expanding their operations to developing countries of Asia. They have lot of competitors in every region of the world in Ford, GM, Fiat Chrysler, Toyota, Hyundai, Honda, etc. Tesla’s vision statement, per business analysis, confirms that their aim is to be leading electric vehicle manufacturer around the world (Rowland, 2018).

Tesla’s Financial Condition

As of 10 June 2018, The Market Cap of Tesla is $56.0 Billion, Revenue is $15.17 Billion, and outstanding shares are 169,793,685. For the quarter ending on 31 March 2018, the financial summary of tesla suggests that revenues $3.4 Billion which is an increased of 26% from previous quarter of December 2017 out of which $3.0 Billion belongs to the automotive segment. This also indicates that revenue increased to $410 M which is an increase of 92% for the Energy generation and storage segment. Out of these numbers, Tesla’s united states segment’s revenue increased by 45% to $1.84 Billion. Important to note that Net loss changed to $709.6 million which is an increase of $330.3 million. Please see below for Financial Statements of last 4 quarters (“TSLA Cash Flow Statement”, 2018).

Constraints and Weaknesses

Like other innovative companies which are striving to go big, Tesla Motors Inc has their set of weaknesses and constraints. Tesla has a debt problem. About 72% of their total capital in 2016 is a debt. Usually these debts are subject to heavy interest rates and this will hurt their earnings in the coming quarters where the numbers will start to look bleaker which will turn away the investors too. If the debts are not paid away as needed because of the bad cash flow numbers, capital expenditures and investments will reduce which will hurt the company on a short term and long-term basis (Dalvagas, 2016).

It is also known that tesla is burning through their cash reserves and this happening over many years. Its not surprising for a company which is striving so hard to make inroads into electric vehicle market. The reason for burning this much of cash is due to research and development of sophisticated technologies for their electric cars. They have also invested lot of cash into their developmental efforts of the Gigafactory which produce lithium ion batteries. All these reasons have resulted in negative cash flows. This let tesla to sell more shares and find more cash to burn which they can only get through more debt (Dalvagas, 2016).

Some of the constraints are that tesla is in a highly competitive market. Electric vehicle market is limited and most people around the world are still fascinated by gasoline engine cars. Most of the electric vehicles which tesla manufactured till date have been expensive and the gasoline cars in the same price range have been throwing lot of competition on tesla. Their only hope is that once model 3 hits the market in 2018, they can compete very well with the lower end vehicles too.

Tesla’s Management Philosophy:

Management Philosophy of tesla is about encouraging employees to come up with and communicate the easiest way to fix the problems. Usual chain of command is every through the manager, but this is flawed because it enhances the manager but doesn’t help serve values of the company. Anyone working at tesla has power and chance to talk to anyone else they would like to talk to discuss ideas and solutions. Tesla aims to make sure they are not creating any ‘us v/s them’ attitude which will hurt the communication (Bariso, 2017).

Organizational structure and Decision making of Tesla

Organizational structure of Tesla is ‘functional’. This also referred to as a ‘Unitary-form’ organizational structure. The main characteristics of tesla’s organizational structure are that it’s a functional based hierarchy. They have teams and offices over the world overseeing the international and domestic operations. It consists of Chairman & CEO, and wings like Finance, Technology, Global sales and services, Engineering, and Legal. It is also a centralized corporate structure and hierarchy is controlled through central headquarters. They have Automotive and Energy Generation and Storage business segments. However, hierarchy in these segments is as not as important in their functional based hierarchy. The Headquarters make the major share of decisions (Meyer, 2018).

The Product

Goods and Services which Tesla offers

Tesla has two business segments. Automotive and Energy Generation and Storage business segments. Tesla Motors Inc relates to the Automotive business and it offers electric vehicles such as Tesla Roadster, Tesla Model S, Tesla Model X, and Tesla Model 3 and Tesla semi-truck. Tesla Model 3 is their cheapest and economical version of their electrical vehicles. This product has already debut d and unveiled yet to be shipped to majority of the people who reserved it. They are projected to be shipped to majority of the consumers by the end of the year 2018 and start of 2019. Tesla’s Energy Generation and Storage business segment produces lithium ion batteries at their Giga factory. They also make solar panels, power walls, and solar roofs (“Form 10-K”, 2016).

Consumer needs which Tesla products solve

Right from the outset, Tesla is working towards solving the challenges faced by today’s world. With natural resources depleting, renewable and sustainable energy and products are in greater need. Their electric cars are the sustainable options to replace the gasoline engine operated cars and vehicles. Their energy segment is solving the energy and power needs through solar roofs, solar panels, and power walls. They are also reshaping the world by changing the perceptions on how driving can be made safe. They are working a purpose economy where they want to service people of the world through their products for the consumers. It is not all about profits to tesla (Hurst, 2014).

Promotional mix, channels of distribution, and pricing strategies of Tesla

Tesla’s promotional and marketing mix consists of 4 main components. They are Product, Place, Promotion, and Pricing. This is also the strategy which tesla uses as marketing plan where maximum effectiveness is achieved. They can reach their customers and improve their profits this way. Their place, and promotion components are the most unique and unique strengths which are different from other companies in the automotive industry (Kissinger, 2017).

Tesla’s product mix is already known with their ventures in electric cars, batteries, and energy and electric vehicle powertrain components. Tesla’s vision and mission statements already reflect their intentions of coming up with best sustainable and renewable energy products via cars and other. So, marketing is also focused on the same strengths. Tesla’s promotional mix consists of 5 main components, which are, Viral marketing, Personal selling, sales promotions, public relations, and direct marketing. For example, Tesla model S was marketed was a car for kids and it went viral on social media. Their company owned stores and galleries have employed personal selling through sales personnel (Kissinger, 2017).

Premium pricing strategy is used by Tesla Inc. Because most of the tesla products are unique with their newly developed technologies, their consumers are willing to pay premium prices for tesla products. Their intention towards ecology doesn’t hurt their cause either. This pricing strategy is driven by their innovation and product design. Tesla’s product differentiation and uniqueness confirms and justifies their premium pricing (Kissinger, 2017).

Competitive Advantage which Tesla’s marketing strategy offers

The competitive advantage which tesla’s marketing strategy offers works in both ways. Their placing and promotion helps them reach to many customers also through viral marketing and social media. There is generally good impression about tesla among young people which their efforts in conserving environment, development of high advanced electrical cars. Their battery supply chain basically builds itself. Their supercharging network is advanced too. Their car software is so advanced than their competition that consumers are easily attracted. There is a great deal of curiosity among people among their amazing products. Tesla also services customers directly which is helping with their premium pricing strategy (Kissinger, 2017).


  1. Bariso, J. (2017, August). Employees Describes What Great Communication Looks Like. Retrieved June 10, 2018 from https://www.inc.com/justin-bariso/this-email-from-elon-musk-to-tesla-employees-descr.html
  2. Dalvagas, I. (2016, May). SWOT Analysis: Tesla Motors, Inc. Retrieved June 10, 2018 from http://www.valueline.com/Stocks/Highlights/SWOT_Analysis__Tesla_Motors,_Inc_.aspx#.WyNV-adKjIV
  3. Form 10-K. (2016, December). Retrieved June 10, 2018 from https://www.sec.gov/Archives/edgar/data/1318605/000156459017003118/tsla-10k_20161231.htm
  4. Hurst, A. (2014, April). How Tesla Is Driving the New Purpose Economy. Retrieved June 10, 2018 from https://www.fastcompany.com/3028540/learning-from-tesla-about-how-good-ideas-spread-to-create-a-purpose-economy
  5. Kissinger, D. (2017, February). Tesla Motors, Inc.’s Marketing Mix (4Ps) Analysis. Retrieved June 10, 2018 from http://panmore.com/tesla-motors-inc-marketing-mix-4ps-analysis
  6. Meyer, P. (2018, January). Tesla Inc.’s Organizational Structure & Its Characteristics (Analysis). Retrieved June 10, 2018 from http://panmore.com/tesla-motors-inc-organizational-structure-characteristics-analysis
  7. Rowland, C. (2018, January). Tesla, Inc.’s Mission Statement & Vision Statement (An Analysis). Retrieved June 10, 2018 from http://panmore.com/tesla-motors-inc-vision-statement-mission-statement-analysis
  8. TSLA Cash Flow Statement. (2018, June). Retrieved June 10, 2018 from https://www.investing.com/equities/tesla-motors-cash-flow
  9. TSLA Company Financials. (2018, June). Retrieved June 10, 2018 from https://www.nasdaq.com/symbol/tsla/financials?query=ratios

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Does Tesla have a good business strategy?
Their HR department prioritized productivity, and hence Tesla has an intense work culture and high-level TQM metrics. Tesla's broad differentiation strategy is a long term play, with a focus on electric automobile automation, battery technology, and environmentally friendly products such as solar roof tiles.
Is Tesla's business model sustainable?
Bottom line: Tesla has sustainability tied to its mission, and they are doing awesome things in the solar energy space. Still, their current business model is not sustainable . Wait until Tesla removes cobalt, improves worker conditions and reduces vehicle prices to make an ethical purchase.
What is Tesla's main business model?
The Tesla business model operates as a Direct-to-Consumer (D2C) business model as it sells directly, cutting out middlemen such as dealerships and offering its own charging station network.
What is Tesla's production strategy?
Tesla business strategy can be broadly classified as product differentiation . Accordingly, the electric automaker differentiates its vehicles on the basis of sustainability, performance and design.
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