To understand Tesla’s business model it’s critical to look at a few key ingredients.
To appreciate those elements listen to the full history of Tesla in our podcast.
Yet, they soon realized this assumption was completely off.
Not only they didn’t manage to secure proper parts for the vehicles, but none wanted to risk having electric vehicles that could have caught fire.
Instead, if Tesla wanted to make its business plan viable it had to build its own manufacturing centers. It took years for the company to do that, and it’s starting to pay off today.
Now Tesla has various manufacturing facilities, called Gigafactories.
Over the years Tesla managed to open various Gigafactories: in Texas, Shangai, and Berlin.
The Gigafactory is a key ingredient to enable Tesla to mass scale the supply side. Meaning that the company will be able to manufacture potentially millions of cars, to distribute across the world.
Energy storage and generation
That is why, over the years, Tesla has been ramping up its electric generation and storage arm.
And for the same token, when the Tesla energy storage and distribution infrastructure grows to the point of enabling third-party to get energy, this part will become a key ingredient of Tesla’s business model success.
Another key element of the Tesla business model which the company started to build early on, is the direct distribution or the ability to sell Tesla vehicles either through its online stores or via its Tesla stores.
Tesla started to open its direct stores, very soon, as the company borrowed Apple’s direct sales playbook.
This wasn’t easy to set up, and actually pretty controversial for the auto industry, as most car sales went through dealerships, yet Tesla set to do just that.
And financing models
As explained in real-time insurance, a combination of lower insurance premiums, and better leasing rates has the potential to ramp up Tesla’s demand side, making it possible for many millions of Americans to own a Tesla.
This is critical, because Tesla, on the one hand, can use its cars to gather the driving data.
This will enable the company to build its own database of drivers, which can be dynamically scored, to assess their insurance premiums.
If drivers, can adjust their driving behaviors, by improving their scores, they cal also see their insurance premiums reduced.
In addition, this might also make the whole lease, less expansive, thus enabling more people to afford to buy a Tesla.
And by enabling Tesla to build another valuable business unit, which can be used to further scale its operations, in the long run!
- Manufacturing, together with energy storage and generation, and direct distribution are some of the key ingredients of Tesla’s business model.
- Tesla produces its cars, in-house, controlling the supply side of the business.
- Tesla also produces the parts for energy storage, and generation, which is part of the energy infrastructure, critical to power up Tesla vehicles, and makes the whole network of electric cars more valuable. While, on the other hand, also working as an infrastructure for third-party electric players, in the future.
- Tesla also directly distributes its cars, through its e-commerce or physical stores, thus cutting middlemen and dealerships.
- Lastly, Tesla leverages real-time driving data from its customers, to build a database, and dynamically adjust insurance premiums, which also makes Tesla more affordable. Thus, giving the chance to more people to buy a Tesla in the future. If the manufacturing helps Tesla push its supply-side to mass scale, real-time insurance rates combined with in-house leases, enable the company to scale the demand-side of the business!
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