Tesla’s vision is to “create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles,” while its mission is “to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible.” Tesla used a transitional business model as its ecosystem grew.
In an official presentation in 2011, Tesla highlighted its vision as:
Create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles
While as highlighted by Elon Musk on Tesla’s blog its mission was:
to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible.
To understand what it means, we need to look at Tesla’s history and how it developed.
Tesla was founded in 2003 by a group of engineers. The central idea was to prove that electric cars could be as good, if not better, than gasoline alternatives.
As Elon Musk took over as a CEO, he started to roll out a strategy where Tesla could have an entry price competitive with other cars in the market.
That is why the first car Tesla launched was a sports car, as its pricing was in line with the market.
If Tesla was going to launch a premium car, it would not have made it, because the costs of producing the first prototypes turned out so much higher, that Tesla would have seen all its orders canceled.
Instead, by narrowing down the market, at the point of figuring out a microniche, Tesla could sell a high-priced sports car, in a segment of the market which was much less elastic to price changes, as those were innovators, interested in the technology.
Only after launching a successful sports car could Tesla envision its next step in this evolution.
Indeed, once it had figured out the prototyping of the car, it could start to manufacture a premium car model, at proper pricing for the market, which could be a bit wider.
This targeted a segment of the market, which could be labeled, according to the tech adoption curve, as early adopters.
Those were people interested in the technology, but much more in its value proposition, which was about an alterative to gas-powered cars with zero emissions.
Where are we today? Tesla, with its Model 3 is ready to tackle mass manufacturing.
Of course, as Tesla has scaled and as it launched the new Model 3, its value proposition and scope also changed.
Tesla is now working on achieving economies of scale, and the people buying a Tesla now, are doing it so for different reasons.
It’s about status, looking good with peers, saving on gas, and of course, for some, it’s still about the environment.
Indeed, it’s critical to notice that when a company scales, the value proposition for consumers also changes dramatically.
From a more tech-based, and practical pay-off, the value proposition morphs into demand generation when it adds into the mix social status, and how the consumer feels about her/himself while driving a Tesla!|
To remember the early days, as highlighted by Elon Musk back in 2013:
Our first product was going to be expensive no matter what it looked like, so we decided to build a sports car, as that seemed like it had the best chance of being competitive with its gasoline alternatives.
Therefore, as a go-to-market and entry strategy, Tesla used a higher-priced segment of the market, in seemingly sharp contrast with its mission.
Yet this was a transitional business model that enabled Tesla to be viable in the short term and yet achieve its mission in the long run.
That’s because, in order to become fully viable as a business model, Tesla needed to create an entire ecosystem, also made of energy solutions that could enable electric cars to become competitive in terms of convenience (meant the ability to charge anywhere) in respect to gasoline vehicles.
Therefore, as Tesla rolls out its business model, by enabling this ecosystem to grow year over year, the company can enter larger and larger segments of the markets by offering lower-priced options that might make it possible for Tesla’s vehicles to achieve mass adoption.
The history of Tesla is one of the most interesting corporate histories of the last century.
Starting as an attempt to show the viability of EVs, by starting from a sub-segment of the sports car performance market, Tesla produced its first viable EV in 2008.
From there, the company scaled up its operations in a story with plenty of twists and turns and many near-death experiences.
Elon Musk explained how, in 2018, Tesla was a few days away from bankruptcy and how the company managed to survive and thrive.
Yet, while Tesla’s story might make sense in hindsight, it was a very unpredictable turn of events that transformed Telsa into one of the most interesting companies of the last century!
The history of Tesla, from the early days, until scaling up its operations!
Starting from a microniche to kick off the business
At the introduction of the Tesla Roadster, Elon Musk, in 2006, as the prototype was introduced, highlighted:
The opportunity is now and the need is now to have a car company of this nature and you know one thing I’d say to anyone who’s
considering buying this car is you know you’re not just buying a sports car
you’re actually helping pay for the development of the mass-market vehicles.
The tesla collectives are not paid high salaries we don’t issue dividends all
money all free cash flow goes completely into driving the technology to lower and lower costs and make it more more available and also we’re going to be working with solar panel companies to offer solar options along with the vehicles so that if you buy the solar option and you buy the vehicle you’ll actually be energy positive.
You’ll generate more miles in electricity than you use in your daily commute and so I really I think we should all aspire to be the energy positive in that way.
After a very complex history, made of many near-death experiences, Tesla’s pieces came together in a company that goes way beyond cars!
And while the path seems easy and linear in hindsight, in reality, it was very messy and hard to predict.
I like to say over and over that it takes a decade or more to roll out a business strategy fully.
And when you look at it in hindsight, it looks like a linear journey, when instead, it was a very messy endeavor.
Indeed, when Musk set the master plan for Tesla, it was a very simple plan, which took fifteen years to execute!
Indeed, by 2006, Musk would lay out the foundation for Tesla’s plan for the next decade. It was a four points master plan structured as below:
Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
Breaking down the Tesla business model
To understand Tesla’s business model, it’s critical to look at a few key ingredients:
In-house manufacturing: when Tesla started to execute its business model back in the early 2000s, it thought it could mainly outsource parts of the car, and create an electric vehicle out of those. Yet, they soon realized this assumption was completely off. Not only did they not 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.
Energy storage and generation: another key element to make the Tesla business model scalable is the ability of drivers to find electric stations around the country, and to quickly charge the cars. That is why, over the years, Tesla has been ramping up its electric generation and storage arm.
Direct distribution: another key element of the Tesla business model which the company started to build early on, is direct distribution or the ability to sell Tesla vehicles either through its online stores, or via its Tesla stores.
And financing models: as explained in real-time insurance, a combination of lower insurance premiums and better leasing rates can ramp up Tesla’s demand side, making it possible for many millions of Americans to own a Tesla.
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
Manufacturing, together with energy storage and generation, and direct distribution are some of the key ingredients of Tesla’s business model.
Elon Musk, seen as one of the most visionary tech entrepreneurs from the Silicon Valley scene, started his “career” as an entrepreneur at an early age. After selling his first startup, Zip2, in 1999, he made $22 million, which he used to found X.com, which would later become PayPal, and sell for over a billion to eBay (Musk made $180 million from the deal). He founded other companies like Tesla (he didn’t start it but became a major investor in the early years) and SpaceX. Tesla started as an electric sports car niche player, eventually turned into a mass manufacturing electric car maker.
Elon Musk, an early investor and CEO of Tesla, is the major shareholder with 21.7% of the stocks. Other major shareholders comprise investment firms like Baillie Gifford & Co. (7.7%), FMR LLC (5.3%), Capital Ventures International (5.2%), T. Rowe Price Associates (5.2%), and Capital World Investors (5%). Another major individual shareholder is Larry Ellison (co-founder and CEO of Oracle), with a 1.7% stake.
Founded in 2003 by Eberhard and Tarpenning, eventually, the initial co-founders left the company, and by 2004, Musk first became the main investor. After that, by 2008, he took over as CEO of the company. Tesla would go through many near-death experiences until 2018. And yet, by 2021, Tesla will become a trillion-dollar company.
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory, which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
As an electric automaker and builder of sports cars and now trucks, Tesla’s competitors comprise companies like Ford, Mercedes-Benz, Porsche, Lamborghini, Audi, Rivian Lucid Motors, Toyota, and more. At the same time, Tesla is an electric energy production and storage company (SolarCity); it competes with Sunrun, SunPower, and Vivint Solar. And as an autonomous driving company, it competes with companies like Zoox, Waymo, and Baidu with self-driving software.
A real-time insurance business model enables Tesla to build its insurance arm by dynamically adjusting the premiums based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm enable Tesla to scale its demand side of the business.
Adidas’ mission is “To be the best sports brand in the world.” Adidas AG is a German multinational initially founded in 1924 by Adolf Dassler who developed spiked running shoes out of his mother’s house. Today, the company is the largest sportswear producer in Europe and the second largest globally behind rival Nike.
Tesla’s vision is to “create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles,” while its mission is “to accelerate the advent of sustainable transport by bringing compelling mass-market electric cars to market as soon as possible.” Tesla used a transitional business model as its ecosystem grows.
Amazon’s mission statement is to “serve consumers through online and physical stores and focus on selection, price, and convenience.” Amazon’s vision statement is “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.”
Apple’s mission is “to bring the best user experience to its customers through its innovative hardware, software, and services.” And in a manifesto dated 2019 Tim Cook set the vision specified as “We believe that we are on the face of the earth to make great products and that’s not changing.”
Netflix’s core mission, strategy, and vision are that of “improving its members’ experience by expanding the streaming content with a focus on a programming mix of content that delights members and attracts new members.”
Coca-Cola’s Purpose is to “refresh the world. make a difference.” Its vision and mission are to “craft the brands and choice of drinks that people love, to refresh them in body & spirit. And done in ways that create a more sustainable business and better-shared future that makes a difference in people’s lives, communities, and our planet.”
Starbucks highlights its mission as “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” And its vision is to “treat people like family, and they will be loyal and give their all.”
Microsoft’s mission is to empower every person and every organization on the planet to achieve more. With over $110 billion in revenues in 2018, Office Products and Windows are still the main products. Yet the company also operates in Gaming (Xbox), Search Advertising (Bing), Hardware, LinkedIn, Cloud, and more.
Walmart’smission can be summarized as “helping people around the world save money and live better – anytime and anywhere – in retail stores and through eCommerce.” While its vision is to “make every day easier for busy families.” Walmart defines “busy families” as the bull’s eye of its business strategy.
Nike vision is “to bring inspiration and innovation to every athlete in the world.” While its mission statement is to “do everything possible to expand human potential. We do that by creating groundbreaking sport innovations, by making our products more sustainably, by building a creative and diverse global team and by making a positive impact in communities where we live and work.”
Google mission statement is to “organize the world’s information and make it universally accessible and useful.” Its vision statement is to “provide an important service to the world-instantly delivering relevant information on virtually any topic.” In 2019, Sundar Pichai emphasized a renewed mission to allow people “to get things done!”
Gennaro is the creator of FourWeekMBA, which reached about three million business students, executives, and aspiring entrepreneurs in 2021 alone | He is also Head of Enterprise Sales for a high-tech startup, which he helped grow at a double-digit rate since the onset | In 2012 Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
