July 1, 2003, San Carlos, CA | |
June 29, 2010 | |
$17.00 | |
2008 | |
$96.77 Billion | |
140,473 full-time subsidiaries employees worldwide by 2023 | |
$688,908 | |
Elon Musk is the primary individual shareholder, with 20.6% of the company’s shares |
Table of Contents
We describe the Tesla business model via the VTDF framework developed by FourWeekMBA.
, where the more the software is used to record mileage, the better it gets. And the more Teslas are on the road, the more it creates the infrastructure where these cars understand each other. And the more energy stations are available, the more EVs become convenient vs. gas-powered vehicles. Also, Tesla is one of the few companies that managed to build a sold car business at scale, in the last century. | |
To understand where is Tesla today, in terms of business model evolution, see the graphic below.
For all its life, Tesla has been recording net losses and burning cash.
And yet, in a single year, by 2021, it generated so many profits to cover most of the losses recorded in the previous decade.
This is what it means to achieve scale. This is where Tesla is today in terms of scale!
Indeed, when Tesla launched, it had to first showcase that it would be possible to build an EV that would be able to combine performance and aesthetics.
Let me recap the various stages of the evolution of Tesla as it scaled.
Indeed, when looking at any company, it’s critical to understand that it follows a transitional business model, each of which, will serve the company well throughout a specific stage of Scale.
At a certain scale, you need a specific product enhanced by technology, which will help you serve a market, through distribution .
As the company gets ready for further stages that old business model transitions to a new one, where the core building blocks also change.
Let me explain:
In the first stage of growth, Tesla had the first to build a viable EV.
Thus, initially, the problem was more about developing the proper technology and an EV in the first place, which would be comparable to a gas-based vehicle.
Tesla did that by targeting a narrow sub-segment of the sports car industry.
A few hundred people were interested in a sports car that would combine performance and aesthetics, while also avoiding pollution.
At that stage, Tesla didn’t need huge demand, but only a few hundred interested people.
And it didn’t need large manufacturing facilities, but only the proper technology to build a viable EV.
Things changed as Tesla accomplished the task of proving it was able to build a sports car.
This is the moment where Tesla’s business model would be successful by simply targeting a small number of innovators.
This stage was between 2006-2012.
As Tesla managed to achieve the first stage of growth, its business model transitioned, by targeting a wider segment of the market.
To do so, the company had to figure out how to scale manufacturing, while providing a larger number of vehicles, and a product, the Model S, targeting the higher-end of the car market.
Still there, Tesla didn’t need millions of customers, but rather a few thousand.
And this opened up new options to scale for the company.
At this stage, scaling manufacturing was part of the puzzle. Most of it was to test the technology on a much wider number of vehicles, to see if it would be viable at such a scale.
All while expanding demand.
This stage was between 2012-2018.
In the third stage of growth (which is still ongoing today), Tesla had to target the mass market.
In this context, scaling up manufacturing has become critical.
Indeed, if you asked Elon Musk where he focused most of his attention between 2018-2022, he might say the modeling/engineering of manufacturing facilities that would be able to scale production.
This was an incredible fit, which only Tesla managed to achieve in the last decades.
As Tesla went through these stages of its business model, the company has gone through various near-death experiences.
In fact, going from one stage of Scale to the next is not easy as it requires a paradigm shift.
The electric carmaker company is owned by entrepreneur/visionary Elon Musk. Tesla was founded by Martin Eberhard and Marc Tarpenning in July 2003. Elon Musk entered Tesla in 2004, first as an investor and chairman, then he took the role of CEO which he still holds today.
After many delays to the first production of the Tesla Roadster prototype (the first version of the Tesla, which was both a way to validate the market and to generate revenues to be invested in the production of new Tesla models), Martin Eberhard would eventually be ousted, and Musk would, later on, by 2008, become CEO of the company.
It all officially started in July 2003, when the company got incorporated as Tesla Motors, Inc. Two men, Eberhard and Tarpenning, got appointed respectively CEO and CFO.
They had known each other from their time at NuvoMedia, the company they had led to the development of the Rocket eBook. The first e-book was launched in 1996 when the commercial Internet was still at the embryonic stage (for some context, the Amazon Kindle would be launched in 2007).
Yet, even though Eberhard had founded and led NuvoMedia to a successful acquisition, which in the year 2000, was purchased for $187 million, by another media company, Eberhard was all but rich.
In fact, over the years his shares in the company had been diluted to the point, that, Eberhard’s exit from the sale only had not made him rich, but as he was divorcing his wife, most of that wealth went to her, and Eberhard had to start all over again.
Yet, along his journey Eberhard, had met Elon Musk, which, by 2003, was deep into his new venture: SpaceX.
Elon Musk had successfully exited the PayPal sale, by making $180 on a $1.5 billion acquisition in 2002. Yet, while SpaceX had been founded in 2002, Elon Musk had started to look into it, a couple of years before.
Musk was not new to entrepreneurship and the rollercoasters this “profession” was about. In fact, a few years back to PayPal, in 1995, together with his brother, Musk had founded Zip2.
The company built maps and business directories, which were very useful applications for media websites. Eventually, they sold the company to Compaq, for over $300 million, which made Elon Musk more than $20 million to start his next company. Zip2 would become a component of AltaVista, the search engine owned by Compaq.
With the new cash infusion, Musk started his next company, called X.com. Musk’s vision was to transform X.com into a financial behemoth, through the Internet. While his vision was unbounded, he also pushed his team to execute fast.
Yet, X.com had been founded in late 1999, when the commercial Internet was still young, and revolutionizing the financial system was not as simple as it seemed.
X.com’s team randomly met the team of Confinity (for a period they were neighbors sharing the same office building).
Another startup, created in late 1998, similarly to X.com was trying to build an Internet financial company. Yet, while X.com had an unbounded vision, Confinity, which had been founded by Pether Thiel, and Max Levchin, wanted to give people the ability to pay online, by beaming their money through a device, called PalmPilot.
For some context, in the late 1990s, the Palm Pilot was a successful device, especially in California, which is where Confinity was operating. Yet, the initial business plan of the company didn’t seem to work in the real world.
In fact, the beaming technology never took off as they had envisioned.
Instead, by late 1999, one thing was clear, a “side feature” became the killer commercial application for both companies. That was the ability to pay by using an email.
This, in fact, would become the primary feature for both X.com and Confinity, and both had stumbled upon it, as it got very popular on a platform: eBay.
While those two companies were very different, they had completely different visions, and leadership, in a strange turn of events, the companies that once were neighborhoods, eventually merged.
The new company was called PayPal, after Confinity’s email payment feature, which was already well known thourhg eBay. Thus, the company took the name of the side-feature, which unexpectedly became the commercial killer application.
Yet, by early 2000, the newly created PayPal, was all but safe.
In fact, the various near-death experiences in a year time frame turned PayPal into a drama machine. In the meantime, this drama machine had taken out various CEOs, until Elon Musk became – unwillingly – CEO of the company.
Yet, once CEO he pushed the company with his unrelenting management style, which pushed people beyond their limits. The management style of Musk, coupled with a complete divergence in vision between Musk and the other co-founders (in particular Thiel, Levchin, and Sacks) led to a final conflict.
Indeed, in 2000, Musk would be ousted as CEO, with a coup organized by PayPal’s other co-founders, Peter Thiel, Max Levchin, and David Sacks. As Musk was on his honeymoon, he was flying and he could not fight that back.
Musk was out from PayPal, and now he had time to think about what would come next!
As Musk got time to think about his next ventures. He had looked into something that he had been passionate about since childhood: space.
First, he tried to get involved by helping NASA get more funds and interest, in space exploration. He thought that was the main issue. Space exploration, a hot topic, during the 1960s-70s, had stalled, in the last decades.
Yet Musk realized it was not a matter of funding. The whole innovation system, related to space, was non-existent, so he needed to get involved.
As he got involved, he started to build SpaceX, from scratch. Indeed, initially, he had looked into various ways, to outsource parts of the rockets. But over time, SpaceX would have a different approach. SpaceX started to build all the components that would make up the rocket, in-house.
And yet, let’s remember, when SpaceX’s journey, crosses that of Tesla, we’re in 2003, when all SpaceX had was a prototype rocket on a computer. It would still take a few years for SpaceX to successfully perform its first launch.
In fact, on September 28, 2008, SpaceX completed the Falcon 1 launch successfully!
In this context, Tesla entered the picture.
Musk had always been passionate about cars. In the footage, back in 1999, Musk was among the buyers of a rare supercar, which he showed off to the camera:
EVs were in the air. Indeed, in 1999, GM had launched its EV1 , which turned out as a complete flop:
But it was also about performance and coolness.
In fact, most of the electric vehicles that were in production were bulky, ugly, and ineffective.
Tesla was set to change all that.
Tesla’s initial plan was to manufacture a sports car that would be compelling to a very niche audience. Indeed, the target for the Tesla Roadster was to showcase the technology to a bunch of innovators, that liked the idea of an electric vehicle, which performance, could compete with other sports cars.
However, as Eberhard started to roll out Tesla’s business model (Musk had endowed Tesla with a few million, in 2004, to start the production of the Roadster) it became clear that building a performance electric car was not an easy fit.
While Eberhard had targeted the right audience (wealthy Californians, who would use the Tesla Roadster as a status quo), he had miscalculated the execution strategy .
Indeed, Eberhard thought Tesla could be built by outsourcing most of its parts (just like he had done years back with manufacturing the NuvoMedia ebook device). Yet, this turned out to be not the case.
Several challenges came up, right on:
All the above didn’t help.
And Eberhard felt more and more pressure, as time goes by, and the Tesla Roadster is far from manufacturing, and it was way more expensive than the price point Musk had promised.
In this period, a person which played a key role at Tesla, and would be the main point of contact for Musk was JB Straubel. An engineer at the core, he was interested in battery technology.
He had worked in 1993 for Rosen Motors, and, just like Ford, in the late 1800s, Straubel was a racer.
Indeed, for him racing electric cars was a way to showcase their torque (with respect to gas-powered vehicles, electric cars produce an instant torque, which made the start of an EV more similar to a rocket launch than a car start).
Straubel’s ability to tinker with the electric engine would prove critical. In fact, one of the major issues with battery packs was that they caught fire.
Strauber invented a way to prevent batteries to catch fire, by enabling these cells to dissipate their energy. This was a major improvement.
While Eberhard was trying to progress with the Roadster, Musk was putting growing pressure on him. He wanted Tesla to execute faster, and he came up with continuous changes to the car.
Musk, therefore, had very close ties to the company. Indeed, when he had first invested in Tesla, of the total $6.5 million round, Musk had invested $6.35 million of his own money, while Eberhard had invested $75K (as a “skin in the game deposit”).
While the relationship between Musk and Eberhard, initially was a good one.
Over time, it deteriorated. And things only got worse, when Musk introduced a team within Tesla to audit its finance and see what was the real cost of producing the Roadster, at that moment.
From the analysis, it came up that expenses were out of control, and that the challenges to producing the Roadster were none near!
This triggered Musk, who added pressure on Eberhard and convinced him to start thinking about resigning as CEO and focus on the product instead.
While they both had agreed, eventually things precipitated, and the relationship between Musk and Eberhard quickly deteriorated.
To the point that Eberhard left Tesla, by signing a non-disparagement agreement, and after a quest to find Tesla’s new CEO, eventually, Musk appointed himself! It was 2008, and one of the greatest financial turmoils was to hit the US.
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:
These four points would take a decade to be executed. Musk showed how, even when it comes to an unbounded vision, like his, most of it is still about execution.
In the meantime, Musk had become the CEO of Tesla, which had also turned into a draining endeavor, consuming a lot of his time. And yet, as the 2008 financial crisis hit, Tesla managed to survive it, also thanks to a partnership with Daimler , which kept the company afloat.
As Wired explained back in 2009:
The deal provides Daimler with batteries and the know-how needed to bring an electric car to market “at the highest possible speed,” company officials said. In exchange, Tesla gets a big pile of cash and, perhaps more importantly, the parts and engineering expertise it needs to build the Model S sedan.
This deal would be critical for Tesla to get additional oxygen while having a strategic partner, and going toward the IPO.
In fact, Tesla would IPO the year after, at $17 per share, valuing the company at about $2 billion.
As Tesla started to roll out its business plan, back in 2003, the company chose to keep control over the sales experience.
This choice was not an easy one. Indeed, the Tesla executive team liked the idea to go direct to consumers. But in the auto industry that was not an easy fit.
In fact, most auto companies sold through car dealers and franchises. Those franchises represented a huge, and powerful industry, which made most of its money, not necessarily on the sale of the vehicle, but rather on servicing the vehicle over time.
Yet, since the onset, Tesla had a feeling that going through car dealers wasn’t the right pick for it. And it started to build its retail capabilities.
In that respect, Tesla borrowed Apple’s retail strategy . For that matter, George Blankenship, a key player in the retail strategy of both GAP and Apple, played a key role in launching the Tesla store operations.
In 2008, Tesla opened up its first store, in LA, on Santa Monica Blvd.:
The store would play a key role in both educating people about the Tesla brand, but also, later on, developing the service side of the business.
By controlling the customer experience, Tesla could, over time amortize the cost of the stores and build a valuable/differentiated brand. Even though Tesla’s cars were expensive.
Building up stores that sold wasn’t easy either.
By 2013, Tesla sales figures looked bleak, so much so that Musk looked into a potential sale of the company to his friends, Google’s co-founders’ Page and Brin, for $6 billion.
Indeed, after setting up the templates for the stores, Blankenship had left the company. And Tesla’s slowing sales were clear in 2015. McNeill revamped the sales force and trained it to close deals.
Where in the early days the store was only about education, by 2015, it had to become a sales machine, to make Tesla numbers add up!
By 2022, Tesla had hundreds of locations across the US.
To get to its sales numbers though, Tesla had to solve another critical issue,: making batteries for its cars available at scale!
As we go through the whole Tesla history, another key ingredient was the Gigafactory.
In fact, as Tesla had successfully launched, and dumped up production of the Roadster first, it had already started to invest in the Model S, which by 2012, had launched.
Yet, the real turning point, for Tesla’s scale would be represented by the Model 3.
Indeed, the Model 3 would have changed it all for Tesla, by expanding its market and by enabling it to “ cross the chasm .”
The Roadster proved the viability of the technology to a small niche of the sports car industry, represented by innovators who were more interested in the technology.
The Model S had represented a further step. Moving from innovators to early adopters. People are interested also in the technology, but also in the performance, aesthetics, and in part, pricing.
As Tesla moved ahead, the Model 3, became the turning point. The car to move from early adopters to the early majority.
In fact, as the company highlighted “ Tesla’s mission is to accelerate the world’s transition to sustainable energy through increasingly affordable electric vehicles and energy products. To ramp production to 500,000 cars per year, Tesla alone will require today’s entire worldwide supply of lithium-ion batteries.”
Therefore, where the Roadster was about prototyping, the Model S was about manufacturing, the Model 3 was all about mass manufacturing!
In order for Tesla to achieve mass scale, the Gigafactory played a pivotal role.
As the company explains :
Tesla broke ground on the Gigafactory in June 2014 outside Sparks, Nevada. The name Gigafactory comes from the word ‘Giga,’ the unit of measurement representing “billions.” The Gigafactory is being built in phases so that Tesla can begin manufacturing immediately inside the finished sections and continue to expand thereafter. Already, the current structure has a footprint of more than 1.9 million square feet, which houses approximately 5.3 million square feet of operational space across several floors. Still, the Gigafactory is about 30 percent done. Once complete, Tesla expects the Gigafactory to be the biggest building in the world – and entirely powered by renewable energy sources. Designed to be a net zero energy factory upon completion, the facility will be primarily powered by solar, and installation is already underway.
For Tesla to build its own batteries was another turning point.
As Tesla scaled, one thing was clear, Musk sought to control.
Tesla had kicked off its business plan by wanting to outsource almost everything.
Instead, it ended up manufacturing its own batteries, while going direct to consumers with its online and retail stores.
Another piece of the puzzle was lacking: energy production.
In that respect, a company called SolarCity, founded in 2006, would eventually become part of Tesla.
Musk had prompted his cousins, Lyndon Rive, and Peter Rive to start SolarCity.
The idea was to build this into an external arm, able to provide potentially clean energy for Tesla vehicles. In fact, Musk backed the company, while sitting on the boars of SolarCity and Tesla.
Yet, by 2016, the financial outlook for SolarCity looked bleak, and Tesla had to bail out the company by purchasing it for $2.6 billion.
Later on, Musk would be involved in a lawsuit from shareholders around this acquisition .
However as SolarCity looked like a bailout, Musk was able to reframe it as an expansion of Tesla’s mission.
In fact, in 2016, ten years after the Tesla Master Plan, Musk drafted the Master Plan, Part Deux (part two):
As Musk justified at the time:
We can’t do this well if Tesla and SolarCity are different companies, which is why we need to combine and break down the barriers inherent to being separate companies. That they are separate at all, despite similar origins and pursuit of the same overarching goal of sustainable energy, is largely an accident of history. Now that Tesla is ready to scale Powerwall and SolarCity is ready to provide highly differentiated solar, the time has come to bring them together.
While this was a narrative Musk had built around, and to justify the acquisition of SolarCity, by 2021, the energy generating and storage segment (of which SolarCity was part) generated over $2.79 billion in revenues.
When Apple launched the iPhone, it combined hardware, operating system, and a marketplace to enable third-party to develop applications on top of its device.
The iPhone’s success was staggering, not just because it represented a device adopted, at mass, which would build the next consumer platform for decades to come.
Instead, Apple had managed to succeed nonetheless how expensive the iPhone was and is (the latest iPhone is more expensive than most computers out there).
How did Apple manage to succeed in distributing its iPhone?
Steve Jobs made mobile carriers subsidize the iPhone by amortizing its cost through the phone plans! ( Apple deal explained here).
Still, as of today, most of the iPhone sales do not come from Apple direct stores. They come from third-party stores, which sell those iPhones via mobile carriers plans.
This is how you make a very expensive product, accessible, at scale.
At the same time, Tesla borrowed this strategy . But rather than enabling the subsidizing of Tesla through third-party, the company is doing it the way it has always done, through in-house leasing.
In fact, back in 2019, Tesla started to rump up its leasing operations of the Model 3 (the car which is supposed to go to the masses!) to enable the amplification of its distribution strategy , by subsidizing the product, and by building its own leasing arm.
In 2021, Tesla generated over $1.64 billion in revenues from its leasing arm (growing 56% year-on-year). And it’s not just about the revenues coming from the leasing arm.
It’s primarily about the additional distribution potential that this leasing arm would add to the company’s customer base (considering that Tesla is experimenting with a $0 down payment in various states in the US).
Back in 2018, to Musk’s admission, Tesla was going through a very tough time again (the third near-death experience), and most expected Tesla to fail.
So much so that Musk was looking into selling Tesla to Apple, for $60 billion!
The deal didn’t land, Tesla kept pushing through executing its plan, and after avoiding the worst period since its inception (short sellers were betting against Tesla since 2015), the opening of the Shangai Gigafactory made things look great again!
The Gigafactory is instrumental to Tesla’s future ability to deliver cars at scale. In 2022, another key milestone was achieved. Tesla opened its Berlin Gigafactory, right in the heart of Europe’s automotive industry!
Working on Master Plan Part 3 — Elon Musk (@elonmusk) March 17, 2022
While the challenges ahead for Tesla are still major, from mass production to the ability to deliver its new models, to a fully self-driving car, the ability to automate manufacturing through robotics, and to build its leasing/financing arm.
Yet Tesla seems to be building up what we can define as an energy infrastructure platform.
This platform might go well beyond cars, to embrace transportation, robotics, software, service, and finances.
The bet then is how big is this market in the future.
And to be sure, while this all makes sense in hindsight, Musk’s vision to get there has always been there. The pat was all but linear.
The journey from the Tesla of the early days, to the Tesla of today, has gone through many near-death experiences, potential sales of the company, several mental breakdowns of Musk and the executive team around him, and many exciting achievements!
And still, in 2018, Tesla’s success was all but granted.
It took about 15 years for the company to build a viable business model at scale.
And while things progressed slowly for a long-time, they eventually and suddenly took off, blowing competition off the water.
It took two decades for Tesla to build the company we know today, and three years (between 2018-2021) from close to bankruptcy, to the trillion-dollar company!
If there is a lesson we can learn is innovation is expensive, unpredictable, first slow, then extremely fast, and only explainable in hindsight.
As of February 2024, Elon Musk is worth more than $190 billion.
While we all know Tesla today, its strategy was shaped already a few years back. Usually, effective strategies get rolled out in years, and only after they become successful do those become obvious.
Yet, when they are getting rolled out they are not obvious at all. So much so, that those rolling out the unconventional strategy , are getting criticized, ostracized, and only in the end idolized.
This is the case of Tesla’s long-term strategy , which is worth analyzing to understand what entry-strategy Tesla employs, and what its long-term strategy looks like.
Based on the market context, companies, especially startups have to find ways to enter markets, often dominated by other players, and roll out a temporary business model, which is only viable in the short-term, as it helps the company to transition to a more mature business model, to achieve scale.
When Tesla entered the market, it did it via the launch of the Roadster, a sports electric car, so it could start validating the market gradually, by a sub-segment of the automotive industry.
This enabled Tesla to enter with a product priced competitively (Tesla wasn’t able at the time to offer an electric vehicle at a competitive price). As sports cars are higher-priced, that segment of the market was in fit with Tesla’s temporary business model.
At the same time, the sports car segment also had customers open to more innovative products, as long as they would be highly differentiated.
Yet before transitioning to a new business model , the company will need to validate smaller segments of the market by attracting the psychographic which is ready to take on the new technology.
Yet often new technologies require the development of a whole ecosystem. For instance, in the case, of Tesla, it’s not about convincing people that electric cars are “cool” (not only that).
But also, initially, about providing the infrastructure to make the electric vehicle competitive in terms of everything else (availability of charging stations, charging vs. refilling, cost of batteries, time to recharge, and so on).
Only a few years after, in 2012, Tesla would finally start to roll out a business model based on potential mass adoption of its electric cars:
Only in 2012, Tesla would finally launch its Model S, the electrical sedan, intended to be adopted at a mass level. This strategy is still getting rolled out, and it might still take years to get to the level of mass production.
Successful strategies take years to become viable, as in some cases, they require the fit between the technology and the ecosystem it encompasses and the market.
When this happens the company rolling out the business model will reach its full potential in terms of scale.
Back in 2012, Elon Musk explained that well:
“In 2006 our plan was to build an electric sports car followed by an affordable electric sedan, and reduce our dependence on oil…delivering Model S is a key part of that plan and represents Tesla’s transition to a mass-production automaker and the most compelling car company of the 21st century.”
Tesla turned a profit for the first time in the third quarter of 2019. Indeed the company posted $143 million in net profits. However, annualized the company’s net losses were $862 million.
As highlighted in its financial statements, Tesla offers three core values to its customers:
Source: Tesla Financials
Tesla’s core technology moves around three core parts:
For the first time in its history, in January 2020, Tesla passed the $100 billion market capitalization.
By 2022, Tesla passed a trillion-dollar market cap, a 10x growth. For some context, in the same period, a company like Ford had a 60-70 billion dollars market cap.
Tesla sells three main products:
A four-door mid-size sedan with a base price for mass-market appeal produced both in the Fremont Factory and. at the Gigafactory in Shanghai.
That is a compact sport utility vehicle (“SUV”) built on the Model 3 platform with the capability of seating up to seven adults.
That is a four-door full-size sedan that features large touchscreens driver interface, Autopilot hardware, over-the-air software updates, and fast charging through our Supercharger network.
Related : What Is a Business Model? Successful Types of Business Models You Need to Know
Back in 2018, Elon Musk highlighted the long-term vision for Tesla :
Our goal is to become the best manufacturer in the automotive industry, and having cutting edge robotic expertise in-house is at the core of that goal. Our recent acquisitions of advanced automation companies have added to our talent base and are helping us increase Model 3 production rates more effectively. We don’t want to simply replicate what we have built previously while designing additional capacity. We want to continuously push the boundaries of mass manufacturing.
Tesla’s mission can be summarized as:
to accelerate the world’s transition to sustainable energy.
As the company highlights :
Tesla builds not only all-electric vehicles but also infinitely scalable clean energy generation and storage products. Tesla believes the faster the world stops relying on fossil fuels and moves towards a zero-emission future, the better.
Elon Musk is getting ready to share a further Master Plan, for Tesla’s coming decade.
Main Tesla subjects will be scaling to extreme size, which is needed to shift humanity away from fossil fuels, and AI. But I will also Include sections about SpaceX, Tesla and The Boring Company. — Elon Musk (@elonmusk) March 21, 2022
Tesla has four main sources of income:
Based on Tesla’s financial statements, in 2021 the company almost doubled its revenues while improving substantially its bottom line.
The most important revenue stream is the Automotive sales revenue ( which includes revenues related to the sale of new Model S, Model X, and Model 3 vehicles, including access to Supercharger network, internet connectivity, Autopilot, full self-driving, and over-the-air software updates, as well as sales of regulatory credits to other automotive manufacturers ) with over $45 billion, followed by automotive leasing with over $1.6 billion and services and other with over £3.8 billion.
And to be sure, this was all but a linear process. As Elon Musk highlighted, Tesla’s success was far from taken for granted. The worst near to death experience was in 2018 when Tesla wasn’t able to hit its production target, in what Musk called a “production hell.”
That funding round completed 6pm on Christmas Eve in 2008. Last hour of last day possible, as investors were leaving town that night & we were 3 days away from bankruptcy. I put in all money I had, didn’t own a house & had to borrow money from friends to pay rent. Difficult time.
Tesla is vertically integrated , as its pipeline goes from manufacturing to direct sales of its vehicles.
As highlighted by Tesla “the benefits we receive from distribution ownership enable us to improve the overall customer experience, the speed of product development, and the capital efficiency of our business.”
Even though a vertically integrated network represented a substantial investment in terms of physical assets Tesla can keep control over the experience of its customers. While also being able to retain important feedback throughout the supply chain.
Indeed, in a model where the customer is reached via indirect distribution the company might lose control of the customer experience at the last mile, and the valuable feedback it can gather from the marketplace.
Tesla follows an unconventional distribution model compared to other car manufacturers where the final sale is made via car dealerships which are not tied to the company.
Back in October 2012, Elon Musk explained in a blog post, the whole philosophy around Tesla’s distribution strategy :
There are reasons why Tesla is pursuing a company owned store and service center model that we feel are really important. In many respects, it would be easier to pursue the traditional franchise dealership model, as we could save a lot of money on construction and gain widespread distribution overnight. Many smart people have argued over the years that we should do this, just like every other manufacturer in the United States, so why have I insisted that we take a unique path?
Some of the key elements that made Tesla go with this strategy , which was way more expensive, and hard in the short-term was:
For traditional car dealers, gasoline cars constituted the vast majority of their business. Thus, the franchise dealer would have been in a conflict of interest in offering a Tesla product, as this would have required them to contrast their core business model.
As Elon Musk highlighted back in 2012: “Tesla, as a new carmaker, would therefore rarely have the opportunity to educate potential customers about Model S if we were positioned in typical auto dealer locations.”
So Tesla built its own stores, located in central places (similar to Apple stores’ distribution or perhaps branding strategy ) to educate and enable potential customers to place orders, but primarily as a long-term objective to educate consumers about the brand and the potential of electric vehicles.
Today, after almost a decade of this strategy , Tesla is among the most recognized brands, and its stores are places that people enjoy visiting, as the electric vehicles proposed by Tesla have become iconic.
With a traditional distribution strategy , it would have been easy for Tesla to run in conflict with franchised stores, by opening direct stores in close proximity. By having only a direct distribution , Tesla doesn’t have such a problem.
Musk is famous for his unconventional stunts. For instance, the stunts of the flamethrowers or the Tesla roadsters sent on space managed to reach hundreds of millions of people worldwide without a dollar spent on ads.
However, this also fueled the myth that Tesla doesn’t spend a dollar on advertising campaigns or marketing .
Like any other company, Tesla has a marketing budget for advertising and marketing campaigns. As an example, in 2018 Tesla reported its “Marketing, Promotional and Advertising Costs:”
Marketing, promotional and advertising costs are expensed as incurred and are included as an element of selling, general and administrative expense in the consolidated statement of operations. We incurred marketing , promotional and advertising costs of $70.0 million, $66.5 million and $48.0 million in the years ended December 31, 2018, 2017 and 2016, respectively.
Thus, even though the former PayPal Mafia member Elon Musk is the master of unconventional PR, Tesla still needs advertising to push its sales.
However, if we compare that to the revenue figures for 2018 (over $21 billion), the spending on marketing activities is around 0,3% which is an incredibly low figure, almost negligible, considering that large companies like Tesla spend billions of dollars in branding campaigns!
Based on that, we can indeed affirm, that it’s like Tesla doesn’t have a marketing budget at all! And we’re talking about a company that passed a trillion-dollar in market cap!
Thousands of purchased parts are sourced from hundreds of suppliers across the world. For the key parts (battery cells, electronics, and complex vehicle assemblies) Tesla developed closed ties.
For most car manufacturers, components to build the cars, are often single-supplied. Other parts are instead available from multiple sources. So to diversify the suppliers’ components as car manufacturers also Tesla can experience high volatility in sourcing the components for its cars.
To prevent that, Tesla either looks for multiple sources or can stock up inventories of components.
In January 2020, Tesla passed for the first time in its history the market cap of $100 billion, twice the market cap of GM (about $50 billion) in the same period even though in 2018 GM had 6-7 times the revenues of Tesla. Tesla though is valued as a tech company, which in the future can capture a wider and wider market, thus becoming way more valuable.
By October 2021, Tesla’s market cap would be 10x, reaching over a trillion-dollar! This in part, was due to the fact that the company managed to successfully pass the mass manufacturing stage.
Undoubtedly, Tesla is getting valued as a tech company, an electric energy platform (not much different from its oil equivalent: Exxon or Chevron), and a company that might generate hundreds of billions in sales in the coming years. This is the bet markets are making.
Looking at Tesla just as a company it’s a limited view. Tesla is much more than that. The company is a business platform, meaning it doesn’t just make and sell cars, but it is also an energy generation and storage platform. So it’s both a pipeline and a platform. To understand that let’s see the various components that make Tesla up as a company.
Tesla isn’t just an automaker; it is an electric-only car automaker, an electric storage company, and an autonomous driving player. For that, we’ll have to analyze Tesla from these three perspectives.
Within the automaking segment, Tesla has over the years diversified its products‘ lines, to cover different segments of the market. When Tesla entered the market, as a go-to-market strategy it had to enter it (nonetheless Elon Musk’s long-term vision to make the electric car available to the masses) with the Roadster model .
While this model is still available, this is the highest-priced model and the product Tesla used to bootstrap its operations. Indeed, at the time, Tesla couldn’t produce a lower-cost electric car (Model 3 will finally achieve this goal), and that is how Tesla made its business model viable as it entered the new market for electric cars. This is what I call a transitional business model :
Over the years, as the market matures, Tesla grew, an electric ecosystem was born, and the technology to enhance battery performance improved, Tesla also expanded its products lines to cover the various segments.
The primary models covering these segments are:
In this segment, Tesla just launched the Cybertruck:
Cybertruck’s competitors comprise Rivian, Ford, Bollinger.
Tesla has finally its mass-market product, the Model 3. This model competes with models such as BMW Series 2,3,4,5 Mercedes Class C, CLA, CLS, Audi A3, A4, A5, Lexus, ES, GS, and many others.
Tesla acquired SolarCity back in 2016, for $2.6 billion, and with that, it competes in the electric production and storage industry with players like SunRun, SunPower, Vivint Sonar, Trinity Solar, and SolarWorld to mention a few.
Tesla’s Autopilot is one of the key ingredients of its technology and one of the most interesting future developments for the company. In this segment, Tesla competes with other autonomous driving companies like Zoox (bought by Amazon ), Waymo (an Alphabet bet ), and Baidu.
Automotive Regulatory Credits generated over $1.4 billion in revenues for Tesla in 2021, compared to just 594 million in 2019.
How do they work? Since Tesla produces zero-emission vehicles (“ZEVs”), these credits are sold to other regulated entities “who can use the credits to comply with emission standards and other regulatory requirements.”
As Tesla ramps up its operations, those regulatory credits revenues will also grow together with the increased production of cars.
In fact, the credits are directly linked to Tesla’s new vehicle production.
This revenue stream is extremely important, because (even if small for now) it’s completely free. This means, there is no additional effort/cost for the company is having these credits, it only needs to produce more EVs.
And as the production scales, this number will grow exponentially, thus boosting the company’s profitability and cash flows (at least until this regulation will last)!
In the last decade, Tesla had to make sure it could build its ability to mass-scale production, in what Elon Musk has labeled as “mass-production hell.”
Indeed, after being able to make the first prototype, the challenge Tesla had was to enable production at scale.
This effort, of the last decade and more, actually was about to bankrupt the company on several occasions (the last one in 2018, when Tesla was a few days away from running out of cash).
Yet, things turned around, starting in 2019, and in particular, 2021-2022 were key years. Indeed, Tesla managed to ramp up its operations through the opening of Shangai, Berlin, and Texas gigafactories.
This, made Tesla mostly pass through the hurdle of the mass manufacturing hell.
Now, it gets all about the ability of Tesla to make its cars affordable at scale, which can either happen by lowering the prices (but it would be a process that might require years and not sustainable in the long-term) or by enabling a part of the business to subsidize another part of this business.
This can be achieved through the leasing and insurance arms of Tesla.
In short, by borrowing the iPhone’s playbook, Tesla can enable a wide/mass distribution for its cars. But primarily developing its own leasing and insurance arm.
And for some context, in 2021, the leasing and service arm (powered up by the insurance offering) passed the $5 billion dollar mark!
Read Also: Tesla SWOT Analysis , Transitional Business Models , Tesla Mission Statement .
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When billionaire Elon Musk isn't launching and landing reusable rockets that will help reduce the cost of space missions and help put humans on Mars, he's busy trying to dominate the car industry.
The SpaceX boss has just unveiled his 'Master Plan, Part Deux' for his electric car business, Tesla, and its focus isn't purely on producing cars.
Instead, the four-part plan for worldwide ascendancy focuses on making the company work on sustainable energy projects.
These include: integrating energy generation and storage; expanding Tesla to create electric trucks and public transport; fully autonomous vehicles; and have cities where cars are shared as autonomous taxis.
His plan for the future of the company comes a decade after he published the first part . Ten years ago, Musk set out to start manufacturing electric cars and increase their scale to be affordable to a mass market. Arguably, he achieved this with 400,000 pre-orders of the company's Model 3 – although these have yet to be delivered.
The business has always been about the "bigger picture," Musk said. And the update to his master plan addresses this.
"We must at some point achieve a sustainable energy economy or we will run out of fossil fuels to burn and civilisation will collapse," the former PayPal founder wrote.
Starting with cities, Musk described how vehicles operate, and how people get around needs to change. Next year Tesla will unveil two new types of electric vehicle: "heavy-duty trucks and high passenger-density urban transport".
"With the advent of autonomy, it will probably make sense to shrink the size of buses and transition the role of bus driver to that of fleet manager," Musk said. The plan sets out a developed view of what one of Tesla's buses could look like. The bus would take people "all the way" to their destinations and buttons at existing bus stop would let people "summon" a bus if they didn't own a phone.
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Musk wrote: "Traffic congestion would improve due to increased passenger areal density by eliminating the centre aisle and putting seats where there are currently entryways, and matching acceleration and braking to other vehicles, thus avoiding the inertial impedance to smooth traffic flow of traditional heavy buses." Other self-driving buses have already been developed: this week Mercedes-Benz unveiled its own version that has been driving across Amsterdam .
For those wanting the privacy of their own vehicle, there's a plan for that too. Musk is planning a "shared-fleet" of Tesla cars that operate as a network of autonomous taxis and make money for their owners.
"You will be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost," he explained.
The company will have its own fleets of cars in some cities – a move that will be seen as a direct competitor for the likes of Uber, which is developing its own self-driving vehicles .
For a fleet of autonomous vehicles to work across a city, self-driving regulations need to be improved as technology progresses. At present Tesla's self-driving features – named AutoPilot and in a beta stage – allow drivers to palm-off changing lanes to their cars. An investigation is underway in the US into how a driver using the features died in a collision.
All Tesla vehicles will be able to drive autonomously in the future, Musk added. He predicts software will take a long time to be refined and validated.
The types of heavy vehicles Musk wants to create rely on Tesla being able to upscale its battery production . In the final quarter of 2015, Tesla created just 208 Model X cars, although it has since increased its rate. To do this further it is building a huge Gigafactory with a 1.2 million square metre floor space, in Nevada. By 2020 the company plans to make more battery cells than all of the lithium-ion battery markers combined produced in 2013 – if it achieves it, it will be a huge feat.
Tesla is also ready to "scale" its power-wall technology, which is where Musk's master plan ties together. The wall, a home battery, will rely on the company's battery technology being developed and produced.
To do this Musk is buying his own Solar City company for £1.91 billion, with Tesla's funds, and merging them into one.
He says he wants to: "create a smoothly integrated and beautiful solar-roof-with-battery product" that allows a person to create and store their own energy. Then, with no lacking of ambition, he wants to scale the product around the world.
This article was originally published by WIRED UK
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Tesla Inc., formerly Tesla Motors Inc. is currently estimated to have a total net worth of around $800+ billion. For a company that started only two decades ago, this exponential level of growth is clearly awe-inspiring. The rising demand for electric cars is precisely the major driving force contributing to the EV manufacturer’s skyrocketing success. According to Brand Finance, in 2023 Tesla saw a gigantic upsurge of around 44% in brand value. The pioneer EV manufacturer surpassed Mercedes-Benz and Toyota to become the most valuable automotive brand worldwide.
Additionally, Tesla also boasts the highest “Sustainability Perceptions Value” among all automotive brands, which is crucial for an EV maker . This triumphant success story of Tesla didn’t happen haphazardly rather it was achieved through the meticulous execution of an efficiently orchestrated master plan. The first part of the Tesla master plan was revealed to the public in 2006, followed by the second part in 2016 and the third in April 2023. Today, we analyze Tesla’s secret master plan to see how the first two phases materialized and what the brand plans to achieve with part 3.
We diligently analyzed Part 1 , Part 2 , and Part 3 of the Tesla Master Plan to provide accurate information about the same.
Divided into multiple stages, Tesla’s secret master plan expounds how the brand intends to electrify and replace not just automotive powertrains but the whole of conventional energy sources. The creation and popularization of both luxurious and affordable high-performance electric cars was the automaker’s initial objective. As the numbers reveal, it is evident that Tesla was astoundingly successful in fulfilling that goal. After this triumphant achievement, they moved on to the second phase of the plan.
The second stage involved the expansion of Tesla EVs into every segment, the development of solar roofs, and the advancement of self-driving cars. As of now, it can be said that Tesla has accomplished partial fruition of master plan stage 2, but some stratagems are yet to be gratified. Tesla has already revealed part 3 of their secret master plan which envisions the endowment of sustainable energy for all of Earth. The following table showcases the prices and specs of Tesla’s current model lineup. This versatile array is soon to be enlarged with the addition of the Tesla Cybertruck and second-gen Tesla Roadster.
|
|
|
|
|
| Compact Hatchback | Compact SUV | Full-size Sedan | Midsize SUV |
| $40,240 | $47,740 | $78,490 | $88,490 |
| Single / Dual Electric Motors | Dual Electric Motors | Dual Electric Motors | Dual Electric Motors |
| Rear-Motor Rear-Wheel-Drive / Front And Rear-Motor All-Wheel-Drive | Front And Rear-Motor All-Wheel-Drive | Front And Rear-Motor All-Wheel-Drive | Front And Rear-Motor All-Wheel-Drive |
| Up to 505 hp | Up to 450 hp | Up to 1,020 hp | Up to 1,020 hp |
| Up to 487 lb-ft | Up to 471 lb-ft | Up to 1,050 lb-ft | Up to 752 lb-ft |
| Up to 333 Miles | Up to 330 Miles | Up to 405 Miles | Up to 348 Miles |
| 3.1 Seconds | 3.5 Seconds | 1.99 Seconds | 2.5 Seconds |
| 162 MPH | 155 MPH | 200 MPH | 149 MPH |
RELATED: How Tesla's Upcoming Model 2 Compact Could Change The EV Landscape
Tesla master plan part 1: highlights.
Published on the 2nd of August 2006, the maiden master plan of Tesla Motors is lucid (no pun intended), unambiguous, and easily intelligible. The plan was to build a low-volume performance car, utilize that money to build a medium-volume car, and then use that money to create an affordable, high-volume car. In essence, the first generation Tesla Roadster was the so-called low-volume high-performance electric car. From 2008 to 2012, Tesla sold less than 2,500 units of the first-gen Tesla Roadster across the globe.
After acquiring a new factory in California and ceasing the production of the Roadster in 2012, it was time for the arrival of the medium-volume Tesla car. As you might have guessed, it was the Tesla Model S , the cynosure mainstay flagship of the Tesla lineup. Followed by the unforeseen success of the Model S, a decade after unveiling the original master plan, Tesla launched their first mass-market EV in 2016. It was the Tesla Model 3, the affordable, high-volume electric car which became an overnight success.
Given below is a performance comparison between the first-generation Tesla Roaster and the upcoming second-generation model. This might help elucidate the gravity of Tesla’s growth, advancement, and victory as an automaker.
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|
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| Single Electric Motor | Three Electric Motors |
| Rear-Mid Motor Rear-Wheel-Drive | Front And Rear Motor All-Wheel-Drive |
| 53 kWh | 200 kWh |
| Up to 288 hp | N/A |
| Up to 295 lb-ft | N/A |
| 245 Miles | Up To 620 Miles |
| 3.7 Seconds | 1.9 Seconds |
| 125 MPH | 250+ MPH |
RELATED: Tesla Roadster To Model S Plaid: How EV Battery Technology Has Advanced Since 2008
Tesla master plan part 2 highlights.
Phase 2 of Tesla’s secret master plan was revealed on July 20, 2016, which laid bare the brand’s broad expansion plans. Tesla not only planned to take over the manifold of automotive segments but also targeted the development of extremely advanced autonomous cars. Full self-driving via the Tesla Autopilot feature debuted for the first time in 2016 which has now profoundly evolved to encompass a comprehensive suite of advanced autonomous capabilities. Tesla Autopilot is drastically reshaping the landscape of modern transportation.
Another major agenda included in the second part of the master plan was the creation and widespread dissemination of solar roofs. In order to actualize this goal, Tesla disbursed $2.6 billion to acquire SolarCity, a solar energy company back in 2016. The same year, Tesla was rechristened from Tesla Motors, Inc. to Tesla, Inc. to better suit its burgeoning enterprises. Tesla Solar Roofs, however, didn’t turn out to be a massive success as the brand is nowhere near Elon Musk’s goal of 1,000 weekly solar roof installations.
RELATED: Rivian R1T Vs. Cybertruck: Has Tesla Already Lost The EV Adventure Truck Battle?
Tesla master plan part 3 highlights.
The latest and the most monumental part of the Tesla master plan was exposited on the 5th of April 2023. It discusses the integral switch to sustainable energy and the complete elimination of fossil fuels from planet Earth. This includes the extirpation of gas-powered cars and the singular hegemony of electric cars in the world automotive market. We’ll have to wait and see how this elaborate plan takes shape and molds the future.
However, Tesla has not hit all milestones as promised. Deliveries of the Cybertruck which was announced four years back are yet to commence. This also means that the “making EVs in all popular segments” objective of the master plan part 2 is yet to be fulfilled. Overall the company is thriving inconceivably, and we envisage Tesla to execute their plans for a sustainable future successfully.
Camila Domonoske
Tesla CEO Elon Musk is pictured as he attends the start of production at Tesla's "Gigafactory" in Gruenheide, southeast of Berlin in Germany. on March 22, 2022. Tesla held an investor day on Wednesday. It did not reveal a new vehicle, but it unveiled some of its big-picture ideas on climate change. Patrick Pleul/POOL/AFP via Getty Images hide caption
Tesla CEO Elon Musk is pictured as he attends the start of production at Tesla's "Gigafactory" in Gruenheide, southeast of Berlin in Germany. on March 22, 2022. Tesla held an investor day on Wednesday. It did not reveal a new vehicle, but it unveiled some of its big-picture ideas on climate change.
Anticipation had built for days. Tesla was poised to unveil a new strategic plan at its Investor Day, only the third time the company has laid out a "master plan" that would guide its future.
Analysts were eager to see a new Tesla model — specifically, a much cheaper Tesla, one that could make the most popular electric vehicle brand in America accessible to a far broader swath of buyers.
But at its Investor Day on Wednesday, Tesla did not reveal that vehicle.
Elon Musk's new master plan? Ending fossil fuels.
Instead of a shiny new car, the company went big-picture on climate change, making the case for an aggressive global transition away from fossil fuels — one with a vast number of electric vehicles and batteries, Tesla's core products, as the key components.
Good for a company that has always touted its green credentials, but Wall Street would have preferred a new car. Tesla stock dropped markedly in after-hours trading.
In some ways though, it was vintage Tesla.
Tesla has already radically reshaped the climate conversation, by spurring the auto industry to embrace electric vehicles.
The new "master plan" extended beyond the auto sector to talk about decarbonizing the global electric grid as well as all industry, shipping and air travel, too.
Musk opened the event by arguing the world can rapidly pivot to renewable energy with the help of batteries (to store solar power to use at night, for instance) and, of course, battery-powered electric vehicles. This new "master plan" also nodded to heat pumps and hydrogen for industrial uses.
Lots of researchers, analysts and nonprofit groups have charted out paths to combat climate change. Most emphasize that time is running out, and the scale of change required is daunting.
Musk's tone was more optimistic. He said Tesla had done the math and the switch would cost $10 trillion, less than the world would spend on fossil fuels over the same timeframe. Fully $7 trillion of that would be for electric vehicles — the market Tesla revolutionized, and intends to dominate worldwide.
"Today is not just for investors of Tesla, but anyone who is an investor in Earth," Musk said. "Earth can and will move to sustainable energy, and it will do so in your lifetime."
A Tesla charging station for electric cars is seen at the parking lot of a mall in Puebla, Mexico, on Feb. 26, 2023. Tesla executives talked about new ideas about every facet of its business, including on charging, at its investor day. Pedro Pardo/AFP via Getty Images hide caption
A Tesla charging station for electric cars is seen at the parking lot of a mall in Puebla, Mexico, on Feb. 26, 2023. Tesla executives talked about new ideas about every facet of its business, including on charging, at its investor day.
With no brand new vehicle to drive out on stage, Tesla executives and engineers shared information about how the next generation of vehicles will be designed and built.
The company claims to have a radically reinvented assembly process, which involves making the front and back of the car separately, that could cut production costs by 50%. Tesla also says future vehicles will require no rare earth elements and could incorporate any battery chemistry, making it easier to source raw materials.
To bolster its reputation as an innovative company, Tesla also bombarded investors with examples of how it has developed new features and cut costs.
Tesla boasted of a software update to automatically adjust air suspension mid-drive, based on data from other vehicles about where the road is rough, and a strategy to cut costs on Supercharger stations by preassembling entire stations and dropping them down from a crane, instead of installing each charger individually on location.
A Tesla Model Y car is shown at a Tesla showroom in a shopping mall in Beijing, China, on April 29, 2022. Tesla shares fell after it did not reveal a new car at its investor day. Jade Gao/AFP via Getty Images hide caption
A Tesla Model Y car is shown at a Tesla showroom in a shopping mall in Beijing, China, on April 29, 2022. Tesla shares fell after it did not reveal a new car at its investor day.
The investor day came as investors were feeling more optimistic about Tesla's future, despite growing competition.
Every major automaker now believes that zero-emissions vehicles are the industry's future, and they are racing to catch up with Tesla. That makes it likely that Tesla's share of EV sales will shrink, as more competition comes in. That was one reason for the company's precipitous drop in share prices last year.
But Tesla is producing vehicles at a higher volume than its rivals, and it recently cut prices sharply. That has increased interest in Tesla vehicles, and the move was well-received by Wall Street.
And Teslas remain popular with drivers. The company just won the top award for "Overall Loyalty" to a make in S&P Global Mobility's Automotive Loyalty Awards. In general, returning car shoppers stick with their previous brand about 50% of the time. For Tesla buyers, a solid two-thirds return to Tesla.
"Tesla had a very, very strong year," says Vince Palomarez of S&P Global Mobility. "They have produced a product that is attractive to a consumer ... They lowered their price. They're also getting access to the tax credit again."
Palomarez also notes that Tesla owners often install a Tesla charger at their home. That could be an added incentive to stick with the brand, instead of needing to swap out equipment or use an adapter every charge. He compared it to Apple's proprietary chargers.
"If you have an iPhone and you have an iPad and you have a MacBook, you know, you're going to get the Apple Watch .... the infrastructure is built there," he says.
Vehicle electrification is a small but mighty step in addressing the climate crisis. The recent surge in EV sales is encouraging, but all those vehicles need charging—and we have a ways to go before charging stations become as accessible as gas stops. Fortunately, savvy businesspeople around the globe want to help. They’re wondering how to start an EV charging station business in ever-increasing numbers.
This comprehensive guide will take you through the process, shedding light on the necessary market research, popular business models, grant opportunities, technical and regulatory standards, and more you’ll face in the course of business. Equipped with this info, your business will be up and running faster than a DC charger fills a battery.
When investigating how to start an EV charging station business, grants stand out as an attractive inroad. It's important to consider each carefully, making note of hard deadlines, explicit program goals, desired outcomes, and guidance about how the funds can be used.
President Biden's Bipartisan Infrastructure Law carved out billions in federal funding for infrastructure for electric and hydrogen-powered vehicles. These grants, offered by the US Department of Transportation , can provide a minimum of $500,000 in funding, but take note: The funding must go toward rural communities of less than 10,000 people. These areas likely have next-to-no competition, which could give you an early foothold in expanding markets.
Volkswagen's Diesel Emissions Environmental Mitigation Trust came out of the company's emissions scandal as an effort to undo some of the damage it caused. The trust as a whole creates grant opportunities for projects encouraging the adoption of sustainable transportation, and a portion of it is dedicated specifically to developing EV charging infrastructure in the US. The National Association of State Energy Officials (NASEO) has general info about grant opportunities, but applicants need to check their state's website for specific requirements, as the trust allocates funding at the state level.
Speaking of the state level, several have their own funding offerings. California's Clean Transportation Program offers a mix of grants, contracts, and rebates for EV charging infrastructure, among other sustainable transportation solutions. New York's ChargeNY initiative targets EV charging, specifically. With Charge Ahead Colorado , that state offers grants for the installation of Level 2 and Level 3 fast charging stations in public and private locations. Be sure to check for funding opportunities in your state.
A great starting point in Canada is the Zero Emission Vehicle Infrastructure Program . This $680 million program has carved out funding for EV chargers across the country, but competition is stiff. To be eligible, your proposal must include at least one charger of 200 kW and above, two fast chargers of 50 kW and above, or 20 chargers of all charging levels. Check out our ZEVIP resources page for more info.
For more funding opportunities for your electric vehicle charging station business, read 7 EV charging station grants to apply for when starting your EV business.
There are a few common models those wondering how to start an EV charging station business typically consider. The right one for you will vary according to your goals, expertise, and available resources.
Charging networks work like gas station chains. In this model, you'll own stations at several locations to maximize market density. By charging EV drivers flat or variable rates based on fluctuations in power supply, you'll bring in revenue. You'll either operate the stations yourself or pay a service to maintain them.
This model is very time and resource-intensive because it demands an upfront investment in infrastructure in addition to ongoing maintenance (which in turn demands expertise). It makes the most sense for gas station chains that want to move into the EV space.
Rather than provide the charging infrastructure, solutions providers sell EV hardware, software, and services to residences, commercial buildings, fleet operators, and more. Their offerings vary, including consultation, maintenance, turnkey services for businesses looking to provide EV amenities, and more. Payment occurs either at installation, monthly, or annually if service is ongoing. In this model, turning a profit means soliciting discounts on hardware and software you then sell at a markup. Strong sales and customer service skills are vital to this model, and experience with EVs or other green tech can be a boon.
To learn more about how to start an EV charging station business with a model that works for you, read How to develop a profitable EV charging station business model.
Operating a successful electric vehicle charging station business means ensuring every piece of the operation stays in working order. That keeps customers happy and revenue flowing. As sophisticated feats of engineering, Level 2 and DC fast chargers have several components you'll need to maintain.
The hardware components of an EV charger include its charger box, battery, switches, converters, cables, and connectors. Outer components should be checked for damage and wear on a regular basis, with supplemental checks performed after stormy weather. Connectors and cables must be cleaned of dust and other debris to ensure they work well for as long as possible.
Use your charging station management system (CSMS) to allocate safe and efficient loads for each of your chargers. The system should have safeguards in the event of lost connectivity, maintaining max charge set points in non-volatile memory. A software-driven power management system will outperform local load management features available on the hardware itself. Some systems, including ChargeLab, can detect a full vehicle battery and reallocate power to other chargers on the fly.
If your Level 2 charger takes more than a few hours to give a full charge, or your DC fast charger takes over an hour, you may have a voltage issue that requires fixing or replacing the battery.
EV charging stations rely on payment processing infrastructure such as RFID readers and credit card scanners to collect customer payments. Customers typically transact either via their mobile device (in-app or on the web) or through an external point-of-sale interface. Your CSMS should have complete and accurate receipt information to maintain compliance with CTEP.
If a charging station in your network disappears from your CSMS, that's a sure sign something needs fixing. It may be that the station itself has a hardware problem that requires repair, or it may be a simple connection problem. Choosing a CSMS provider that offers customer support can accelerate troubleshooting and safeguard against extended outages.
For more on maintenance considerations, read A guide to EV charging station maintenance.
Several standards have been propagated around EV charging, handed down by hardware manufacturers, software designers, car manufacturers, and national governments. Here are two of the most important ones in the United States.
If you want to know how to start an EV charging station business safely in the US, you need to review NEC Article 625. That article sets the bar for installing and maintaining EV charging equipment, from where to put the equipment to what kind of materials to use. Some key points:
With $5 billion in federal funding available for EV charging systems, the Department of Transportation (DoT) stepped in with guidelines around who could apply for funding. Funding applicants must meet the National Electric Vehicle Infrastructure standard, which went into effect on March 30, 2023. The standard is designed to promote interconnected EV infrastructure along federal highways, but any system that uses Title 23 federal funds must meet it no matter its location. NEVI covers topics such as eligible charger types, payment processing, cybersecurity, data privacy, and labor rules.
For more on EV charging station standards, read The big list of EV charging station standards and specs to know.
Universal EV charging stations are designed to let EV owners charge their cars no matter what hardware standard or software system is in place. This interoperability makes owning (and recharging) an EV simpler and more practical, which drives further adoption.
In the current EV charging station landscape, operators have to deal with several inconsistencies among different chargers. For example, the wide gamut of hardware can make it difficult to scale a charging network efficiently. But with universal charging software, operators can mix and match products from various manufacturers according to their own budgetary, market, and quality concerns to create the stack that works for them. EV drivers benefit, too, as open protocol charging frees them from painstakingly planning every charging stop on their trip.
Despite their promise, universal charging stations have yet to conquer the market. Many EV chargers claim to be universal, but drivers frequently visit charging stations that turn out to be incompatible. This makes it hard for potential EV owners to trust they can recharge when needed and complicates ownership of EV charging stations.
ChargeLab was one of the first 50 members of the Open Charge Alliance and has advocated for the adoption of open protocols in EV charging since the very beginning (in fact, we run an entire boot camp program for manufacturers to improve their OCPP compliance!).
For more on universal charging stations and the future of EVs, read How universal EV charging stations are driving EV adoption.
As the EV industry matures, more and more manufacturers are adhering to standards that maintain high levels of quality and consistency for consumers. Standards now exist that govern operation, installation, and safety.
To learn more about the regulations and standards that affect how to start an EV charging station business, read The big list of EV charging regulations and standards.
EV chargers have different specifications based on their expected charging level. There are three levels in total:
Level 1 chargers are the simplest to manage because they use existing electrical infrastructure. That makes them a good fit for residential or emergency use. On the other hand, their slow charging speed disqualifies them from commercial use.
Level 2 chargers require specialized installation, using higher-voltage outlets and dedicated software to charge faster and intelligently bill customers automatically. They're well suited to retail deployments.
Level 3 chargers use direct current (DC), which requires specialized hardware and electrical infrastructure. This gets them unparalleled charging speeds, making them ideal for thoroughfares and along major highways as gas station replacements.
Part of starting an EV charging station business means choosing which connector types to support. Some of the most popular examples include:
For more on installation requirements and network compatibility, read EV charger specifications every pro needs to know .
As the number of EVs on the road has more than tripled in the past three years, demand for hotels, condos, and other businesses to add charging stations to their offerings has continued to mount. These chargers' return on investment (ROI) can include additional revenue, brand appeal, and cost savings with the careful deployment of EV charging incentives.
To determine your ROI, begin by understanding your customers. How safe will they feel leaving their vehicles in your care, and how quickly will they need their cars recharged? The busier your business, the more sense it makes to invest in fast Level 3, or DC, chargers. Businesses with slower customer turnover, such as hotels, can likely use a higher ratio of Level 2 chargers.
Next, you'll need to determine where to place these chargers for maximum benefit. Performing market research on the demand for chargers in your area can help clarify this process, as can consulting with a financial advisor with regard to installation costs.
Speaking of: The easiest way to install EV chargers is to turn to an EV solutions provider. They'll do the research, install, and operate the charging stations for you. As an EV infrastructure provider, they likely qualify for more rebates than your business. They're also experts in their field and can guide you through permitting, rebate application, and installation. Finally, they're there to help should something go wrong with the chargers.
To learn more about the incentives set to benefit businesses that install EV charging stations, read 7 EV charging incentives for businesses going green.
Moving into electric vehicle charging is a chance to power both a better world and a healthier bottom line, and investing in the right tools early can make both easier. That's why we at ChargeLab designed our CSMS for deep functionality and wide-ranging flexibility. No matter your hardware, we're here to help. Reach out today to learn more .
If you're looking for software to help build your EV charging business, contact ChargeLab today.
Use the ChargeLab CSMS to connect and manage all your EV chargers from one hub.
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Hi all, I need some help with doing things properly for purchasing a Tesla for use as a business vehicle (*not* leasing). I'm a one-person S-corp and will not be transporting people/equipment, but instead is used for travel from office to hospital(s). What is the correct way to set up car registration, financing, and auto insurance? It sounds like to be able to depreciate the car as a business asset, on the Tesla account page, I have to choose Registration Type as a Company, is this correct? As a result, however, it says the credit application will be submitted on behalf of the business. If I probe some of the local credit unions to see if there is a better rate, can I submit an application on my name instead of the business? And lastly, regarding auto insurance, can you add a business as a second driver? I spoke with one insurance company and I said the car is going to be used for business purposes as stated above and they said that should be okay. What have other owners done in this situation? Thanks.
Thanks for the reply. Can I ask what you chose for Registration Type-Company or two persons? And what did you do for insurance? It wasn't clear from your post if you put it under your name or the business name. Are you insuring only the Tesla with State Farm with commercial auto?
If you are looking into a Tesla for your business, be sure to consider the Section 179 SUV benefits that would be available with the Model X. You could use accelerated depreciation to deduct the entire cost of the vehicle the first year. As a S Corp the tax benefits would flow to the owner, even if it is not registered to the Corporation. If you own the Corp and also own the car, the benefits flow. Gotta check with your Tax Advisor, as everybodys Taxes are different, but it really throws off some huge tax benefits by purchasing a SUV with a Gross Vehicle Weight of over 6,000 lbs. (The Model X qualifies) Section 179 benefits change every year. If you take delivery, and place the X into service by the end of this year you get the entire deduction. Some place the vehicle into service near the end of the year and use it exclusively for business use. That way you could take the maximum 100% deduction. Still need to use the vehicle at least 50% in following years to maintain the deduction. These deductions only work for the Model X. For people that qualify it makes the X much less net cost than either the 3 or S.
Let’s say theoretical you make $10k from your part time business and $90k from your full time job. Could the X be written off to offset your total liability ($100k) or just the $10k from the part time business?
How about deducting electric bill for charging at home?
Only can deduct that portion where the car is used for the business. If it is only used 10% for business, then you can only deduct 10%. They frown on people that will set up a side gig and try to use that to game the deduction.
easier to write off on business for a X then a S. I think the Gross Weight and the class as being a SUV has something to do with it.
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Fast fashion retailer Shein, known for its China-made $5 tops and $10 dresses, has hiked prices by over a third on some core products, in a move likely to boost revenues ahead of its planned IPO, according to an analysis of its pricing strategy.
Tesla has been drumming up support for musk's pay package, especially from retail investors, who make up an unusually high percentage of its ownership base but who often do not vote.
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First Published: Jun 13 2024 | 10:23 AM IST
Elon musk said in an email this week tesla needs to be "absolutely hard core about headcount and cost reduction.".
Massive layoffs, rescinding internship offers, a surprise visit to China … Tesla (TSLA) CEO Elon Musk has been making a series of unusual and swift moves in what increasingly looks like a turnaround plan for his once high-flying electric carmaker. Over the past three weeks, Tesla has slashed thousands of jobs and shut down multiple divisions, including its newly formed marketing team, and Musk has signaled that he isn’t done making cuts. Meanwhile, the billionaire founder is courting the Chinese government to help Tesla open up new revenue streams in the country, the company’s largest overseas market.
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Layoffs and resignations are rattling all levels of positions at Tesla. In an email on Monday (April 29), first reported by the Information, Musk announced that two senior Tesla executives —Rebecca Tinucci, senior director for charging infrastructure, and Danile Ho, director for vehicle programs and new products, are leaving the company and that their teams will be dissolved as a result, affecting hundreds of employees. Two weeks prior, Tesla’s head of public policy and business development, Rohan Patel, announced his departure, and Musk subsequently shut down his entire team.
In the email, Musk said he would begin asking for resignation letters from Tesla executives who retain “more than three people who don’t obviously pass the excellent, necessary and trustworthy test.”
“Hopefully these actions are making it clear that we need to be absolutely hard core about headcount and cost reduction,” he wrote.
On April 14, Tesla announced plans to cut more than 10 percent of its global workforce , which would affect around 14,000 employees. This week, Tesla let go about 500 employees on its EV Supercharger team. Bloomberg has reported that Musk is targeting a 20 percent headcount reduction , citing anonymous sources familiar with his thinking.
Even lowly-paid interns are feeling the pain. Bloomberg reported yesterday (May 1) Tesla has revoked some offers of its summer internships, citing multiple would-be Tesla interns who posted on LinkedIn saying their internship offers had been rescinded. Each year, Tesla hires about 3,000 interns from colleges and universities around the world, according to the company’s 2022 Impact Report .
Tesla was one of the few Silicon Valley companies that managed to avoid major layoffs during last year’s tech slump . But like many of its Valley peers, Tesla hired aggressively during the Covid tech boom and is now dealing with the consequences. “Over the years, we have grown rapidly with multiple factories scaling around the globe. With this rapid growth there has been duplication of roles and job functions in certain areas,” Musk said in a memo announcing layoffs on April 14.
On April 23, Tesla reported the largest quarterly revenue drop in more than a decade. EV sales for the quarter ended March plunged 9 percent from the previous year. And Tesla delivered 20 percent fewer EVs in the January-March period than the previous quarter.
In the meantime, Musk is looking to tap new revenue streams in key markets. This past Sunday, he made an unexpected, one-day visit to China and got his old friend, Chinese Premier Li Qiang’s backing to roll out Tesla’s FSD driver assistance software in the country. The swift dealmaking surprised many industry observers because Tesla’s driving assistance technology had caused concerns for Chinese regulators in the past. In 2021, China banned Tesla vehicles from entering many government facilities due to security concerns over cameras installed on the cars. Those cameras were used to power Autopilot, a less advanced driver assistance program than FSD.
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Students are using artificial intelligence to create sexually explicit images of their classmates..
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A disturbing new problem is sweeping American schools: Students are using artificial intelligence to create sexually explicit images of their classmates and then share them without the person depicted even knowing.
Natasha Singer, who covers technology, business and society for The Times, discusses the rise of deepfake nudes and one girl’s fight to stop them.
Natasha Singer , a reporter covering technology, business and society for The New York Times.
Using artificial intelligence, middle and high school students have fabricated explicit images of female classmates and shared the doctored pictures.
Spurred by teenage girls, states have moved to ban deepfake nudes .
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Tesla did not invent the electric car, but it invented the first successful business model for bringing electric cars to the market.
Master Plan Part 3. The Tesla Team, April 5, 2023. Today, we are publishing Master Plan Part 3, which outlines a proposed path to reach a sustainable global energy economy through end-use electrification and sustainable electricity generation and storage. This paper outlines the assumptions, sources and calculations behind that proposal.
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If you are looking into a Tesla for your business, be sure to consider the Section 179 SUV benefits that would be available with the Model X. You could use accelerated depreciation to deduct the entire cost of the vehicle the first year. As a S Corp the tax benefits would flow to the owner, even if it is not registered to the Corporation.
Connect with Tesla to learn how owning a Tesla fleet can help benefit your community, your drivers and your business.
Starting in the 1980s, European automakers steadily conquered China, racking up millions in sales with little local competition.
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Tesla CEO Elon Musk has been making a series of unusual and swift moves in what increasingly looks like a turnaround plan for the struggling EV maker.
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German Chancellor Olaf Scholz spoke out against restricting automotive trade as the European Union moves closer to slapping tariffs on electric vehicles imported from China.
A disturbing new problem is sweeping American schools: Students are using artificial intelligence to create sexually explicit images of their classmates and then share them without the person ...