Tesla’s Entry into the U.S.

Auto Industry

Introduction

Tesla was established in 2003 by Martin Eberhard and Marc Tarpenning, with the first

vehicle (The Roadster) being released in 2008. An innovative roadmap, encompassing a

strive towards sustainable energy without compromising on the everyday functionality of the

universally accepted fossil fuel powered car was set out. (Tesla, 2021)However, the polarity

of Tesla’s strategy and vision to that of other competitors within the automotive industry, left

many an obstacle to overcome.

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Consumers within the automotive market generally display very little brand loyalty between

sellers, meaning Tesla must try and play on the psychological attachment nature of the human

brain in order to attract and maintain a market share. As Tesla’s conception came about from

nothing due to there being no takeover or merger etc, they faced a huge risk from the start.

An amalgamation of costs including items such as capital, training and research and

development are already incurred before a singular good has even made it to market.

Therefore, the risk factor of Tesla was extremely high, as if the proposed business fails, the

only thing left will be an amass of debt. (Munter, 1998) Due to the modernist and radically

innovative approach of Tesla’s business model, they faced many delays within production

due to issues such as automation and outsourcing partly due to the absence of a pre-worked

blueprint. The conception and installation of solutions entirely internally lead to huge time

delays, a problem Tesla had to face regularly. (Kevin Zheng Zhou, 2012) Due to the scope of

all these adversities faced, a trade off within Tesla’s prioritisation of solving issues will be

ever present. Techniques such as PESTEL or Porter’s analysis will allow for Tesla to select

and alter their strategies in order to maximise utility within the confounds of both the internal

and external business environment.

Niche Marketing

The first recommended approach for Tesla's issue regarding low brand loyalty and

satisfaction is niche marketing. Niche marketing strategy enables a company to target

potential customers within a specific region and acknowledge the variety of requirements or

modifications customers in those regions might seek. Tesla has previously turned to this

strategy in China where they responded to high requests of ‘executive rear seats’ within the

Chinese market which allowed them to simultaneously attract and satisfy a bigger market and

increase their overall profit with the additional costs for the modified Tesla model S

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(Mangram, 2012). This strategy can be beneficial to Tesla in more than one way. By focusing

on a specific kind of customer or a specific region, competing with other car manufacturers

will become more manageable and on a smaller scale, as opposed to mass marketing where

they would be competing globally. Additionally, by focusing on niche marketing, Tesla will

be able to address their customers in a more personal manner and deliver cars suitable for all

with personalized features. In order for Tesla to successfully market their vehicles in different

regions, further research and development is crucial to determine how preferences and

requirements differ between the varying markets which will require additional costs and

time. Techniques like the SWOT analysis would be beneficial here allowing Tesla to identify

strengths, weaknesses, opportunities and threats of the niche market and additionally meet the

more local needs of their customers. One of the greatest strengths of Tesla is their ability to

dominate the U.S electric vehicles market despite some of the issues they face. In 2019, Tesla

model 3 was the most sold electric vehicle of the year, having sold 187,971 cars putting them

ahead of the competition.

Tesla’s weaknesses include a lack of high-volume production and inability to meet demand.

Several factors seem to be an obstacle in achieving higher productions, one of which is a

shortage of batteries for the cars. This issue has previously prevented Tesla from achieving

their goals leading to an unbalanced supply and demand.

In terms of opportunities for Tesla, currently the most important one would be sales

expansion in untapped markets. Many countries with high demand for zero emission cars do

not yet have a supplier. Tesla taking over the unsaturated markets will help increase financial

stability and market share. Lastly, one of the most impactful threats is customer behaviour

towards self-driving vehicles. It could take years for people to build trust towards self-driving

vehicles and Tesla’s recent and often lawsuits regarding the failure of technology in their cars

seems to be affecting customer trust (Tesla, 2020). It is important for Tesla to address those

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issues and threats to work on the relationship between them and their consumers and start

building their trust.

Sustainable Marketing

Another prospective solution to the dilemma regarding decreased brand loyalty is the

concept of sustainable marketing; sustainable marketing is a direct representation of Tesla's

corporate social responsibility and therefore, it is a crucial part of attaining brand loyalty as

well as highlighting the firm’s societal marketing approach. The automobile industry has

always displayed relatively low brand loyalty from customers as exhibited by the fact that

around 80% of customers switched brands when exchanging or purchasing new vehicles.

(Sloan, 2019). As a result of reduced brand loyalty in the automobile industry, Tesla has

introduced its used cars sales programme within its sustainable marketing strategy wherein

the goal essentially remains to build a strong customer base with loyal consumers. Tesla

supports new car sales through exchanging customers' old Tesla or non-Tesla vehicles for

new cars in the trade-in policy which basically provides customers with an incentive to

purchase or exchange their vehicle for a more contemporary and eco-friendly alternative

whilst also supplying Tesla with a stronger customer base. On the other hand, this trade in

policy is very limited due to Tesla’s production line which only produces as many cars as

required as opposed to stockpiling or creating additional inventories which therefore limits

customers’ choice regarding the purchase of previous models and therefore may result in

customers opting to purchase substitutes like the Nissan Leaf or Chevy Bolt according to

porter’s analysis.(Sloan, 2019).

Ideally, all customers aim to maximise their benefit whilst also purchasing identity-consistent

products in order to satisfy their self-concepts (Chugani et al, 2015) and therefore Tesla’s

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primary goal of sustainable development, supported by their sustainable marketing, fulfils

customers’ desire to travel in luxury whilst also protecting the environment and reducing

their carbon footprints. Furthermore, Tesla emphasises on the movement towards more

sustainable forms of energy and modes of tran cgtzsport which therefore highlights its

“sense-of-mission marketing” (UKessays, 2018); this idea is based around the fact that

Tesla’s main marketing and USP is its sustainability which therefore exhibits its push for a

greener society. However,according to Wertenbroch, customers value goods relative to their

immediate or delayed consumption consequences (Wertenbroch, 1998) and therefore Tesla’s

sense-of-mission marketing makes no direct impact nor offers any motivation to purchase an

electrical vehicle to consumers who are unconcerned about the environment. In this scenario,

according to the porter’s analysis the buyer has the ability to reject Tesla’s offers and choose

to purchase a non-electrical vehicle from another brand which would reduce Tesla’s potential

customer base.

Hollebeek comments that firms have increased attention towards “consumer engagement with

brands through emerging technological platforms” (Hollebeek et al, 2020) which reflects

Tesla’s consumer-oriented marketing where it relies mostly on direct sales and promotes

itself primarily through positive media coverage, social media platforms and word of mouth.

Tesla’s positive image is based on their advertisement being solely established on the idea of

eliminating harmful emissions and progressing towards an electric and biofuel based future

for vehicles. Sustainable marketing is emphasized upon by the electrical-vehicles producer

through the use of media as a main focus for advertisement as opposed to producing

billboards and commercials which reinforces the idea to build their customer base on positive

reviews and references of loyal customers. Schmitt states that “the brand is viewed from an

inter-personal and socio-cultural perspective and provides a sense of community” (Schmitt,

2011) which clearly illustrates the Tesla Motor’s club and Tesla Owners’ Directory which are

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the indication of Tesla’s base for current and prospective loyal customers. On the contrary,

due to Tesla’s decision to perform sustainable marketing and relying mostly on opinions and

referrals, the firm fails to be a prevalent figure in the automobile industry which could be a

potential reason for low brand loyalty and a smaller customer base. In accordance to the

porter’s analysis, due to increased competition in the vehicles market due to a large number

of competitors, Tesla can be overshadowed resulting in customers drifting to other brands

like Toyota and Ford.

Overall, Tesla has a societal marketing approach wherein it targets society’s long term

objective of sustainability and eco-friendliness as part of its sustainable marketing scheme.

The electrical-vehicle manufacturer is therefore always evolving and producing new

technology to better assist this objective.

Conclusion

In summary, Tesla’s chosen approach of niche marketing allows for increased customer

satisfaction by allowing individualism of both goods and services. This catered service allows

the business to overcome the common problem of limited brand loyalty within the

automotive industry. Furthermore, by choosing a sustainable marketing approach, Tesla can

capitalize on the cultural shift towards ‘green energy’, boosting market share and building a

loyal customer base all whilst fulfilling their corporate social responsibility.

References:

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sed 2 Apr. 2021].

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● Hollebeek, L.D. and Belk, R. (2021). Consumers’ technology-facilitated brand
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● Mangram, M., 2012. The globalization of Tesla Motors: a strategic marketing plan
analysis. Journal of Strategic Marketing, 20(4), pp.289-312.
● ‌MIT Sloan. (n.d.). Tesla’s Entry into the U.S. Auto Industry. [online] Available at:
https://mitsloan.mit.edu/teaching-resources-library/teslas-entry-u-s-auto-industry.
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● Tesla, 2021. About Tesla. [Online]
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