Described in the media as a real-life Iron Man, Elon Musk surely is an eccentric and at times scandalous CEO. His odd personality combined with the recent massive appreciation of the Tesla stock, which leaves many value investors baffled, intrigued me. I wanted to learn more about the man and particularly understand what he did to make Tesla such a darling in the eyes of customers/fans and investors. Elon Musk: Tesla , SpaceX, and the Quest for a Fantastic Future uncovered just that..
Top-level Background of Elon Musk
Before exploring Tesla’s recipe for success, I will give a provide a very top-level walk-through of his background. Elon founded Zip2, an online city guide software to newspapers, at the age of 24. It was acquired in 1999 at a price of $307 million of which Elon pocketed $22 million. He invested some of that money in X.com, an online banking service. It quickly merged with PayPal, which was later acquired by Ebay. Elon walked away with $180 million from the deal. He has since funnelled that capital into various endeavours such as SpaceX, SolarCity and Tesla. Today, his net worth hovers around $30 billion.
Tesla’s Recipe for Success: A Disruptive Marketing Mix
Now that we’re all caught up, let’s go back to the question of Tesla’s and in length Elon’s recipe for success. Regardless of the industry Elon entries, he revolutionises and disrupts. He turns what we know about an industry upside-down, i.e. by making space rockets that can land safely and be reused rather than being dismantled and scattered across the seven seas upon liftoff or by making a 7 person family car accelerate faster than sport cars designed for speed.
In length, the way the car industry competes is by improving existing designs slightly, i.e. introducing new basic features, improving the milage, advertising how a car’s maneuverability is superior than a competitors, and they generally promoted cars with no added benefits through half-naked women and men in suits. It was/is quite the formula-based industry.
Elon applied his “screw this!” approach to business and launched the Tesla Model S in 2012. A 100% electric luxury car that could run 450 kilometers on a full charge, accelerate from 0-100 kilometers per hour in 4.2 seconds – soundless. Impressive for a 7 person family car. Furthermore, it featured a 17″ touch screen that functioned as the car’s command centre, a build-in internet connection, remote control heating (so you wouldn’t need to enter a cold car on chilly days). In addition, it received the best safety rating ever. Consumer Reports gave it a 99/100 score and called it the “best car ever made”.
Tesla was ridiculed up until the point of the launch, partly because of the tepid launch of the Roadster in 2008 (Tesla’s first car), delays in the release date of the Model S and because of Elon being Elon in public. But once it was launched, it took America by storm and the well-established (fuel-based) competitors needed to play catchup, which wasn’t/isn’t easy. Not only did Tesla release a groundbreaking product, they had designed an overall stellar marketing mix, which was very difficult to copy-paste.
For instance, you could/can charge your Tesla free in any of the Tesla Supercharger stations across the US. You could also choose to replace the battery of your Model S in a minute and a half at the cost of fueling a regular car. In Elon’s words, Tesla owners need only to determine if they prefer the free way or the fast way.
Tesla cars weren’t/aren’t sold at ordinary car dealers either, as is the tradition in the industry. No, Tesla is sold through its own dealers, which are placed in luxury shopping malls or high-end locations. You could walk into these stores and build your own car on any of the many touch screens, i.e. choosing a model, picking a color and customizing it with extra equipment. Once done, the customers will witness his/her dream car come theatrically to life on a big screen in the middle of the store. While the parents are fiddling with customizing their fantasy car, the kids can enjoy themselves in the Kids Area by i.e. painting in Tesla’s own coloring books.
As most car manufacturers sell via dealerships, the way their cars are delivered is in the hands of the dealerships. Usually, the customers would pick it up themselves at the dealership. Tesla, on the other hand, will deliver it at your home address or office. You can, however, pick it up yourself – at the factory. You can even invite friends and families for a free tour of the facilities when doing so. If your car breaks down or it faces software issues, you won’t have to go through the trouble of getting it transported to the nearest mechanic. Tesla will come pick it up, give you a free car to borrow while fixing it, and return it at the location of your choosing.
These are but a few examples of Tesla’s uniqueness. But if you sum-up all of these initiatives, you quickly get the sense that Tesla is radically different from the old car manufacturers’ approach. The company don’t simply sell a car, but a lifestyle. It “sold an image, a feeling of being in contact with the future, a relation.”
You can think what you will about the Tesla stock, but one can’t deny that Elon Musk has been the architect behind one of the greatest growth stories and a business with a marketing mix that resonates deeply with customers.