Tesla Business Model: A Complete Breakdown

Published October 27, 2020 | Author: PenMyPaper

Tesla is the leading manufacturer of electric cars, which also offers energy storage and solar energy solutions for households. Over the years, thisAmerican all-electric automobile company has expanded its business to various international locations especially into China and UK. A close look into Tesla mission statement highlights that the company wants to accelerate the world’s transition to sustainable energy. Therefore, the company is deeply committed to developing products that are sustainable and can reduce people’s dependence on fossil fuel. In this article we have delved deeper into the busines model of Tesla, highlighting how the company earns money through its business venture. It has also shed some light on how the firm has managed to create a strong differentiation in the market and challenges the traditional business practices.

Tesla Business Model

In order to get a complete understanding of Tesla business model for writing papers in college, we first need to look into the value offering of the company and its revenue sources. Tesla is primarily recognized as an electric car manufacturing company, which clearly suggests that the firm manufacturers and sells electric cars to its customers. At present, the company has four different electric car variants, Model S, Model X, Model 3 and Model Y and an upcoming variant called Roadster. Each of these variants belong to different price brackets, which attract a wide range of customer demography. The company wants to be the first market player to boost the paradigm shift in the automotive sector from fossil fuel to electricity.

The financial report of Tesla suggests that the majority of the revenue of the company comes from the its automotive sales.

REVENUES Dec-2018 (USD millions) Dec-2019 (USD millions)

Automobile sales



Automobile leasing



Total Automobile Revenue



Energy generation and storage



Services and others



Total Revenue



The data shown above (excerpt from Tesla financial report) highlights the revenue breakdown for the company. Even though the company operates in more than one sector, it is largely dependent on its electric automotive sales. As of 2019, the company has earned USD 20.82 billion from automobile sales out of its total revenue of USD 24.57 billion. However, the diversification of Tesla into other sustainable energy products has presented new opportunities for the company. In the near future, the diversified business portfolio can help the company to alleviate its financial risks and can also help to generate more revenue.

The company sells its electric cars in its domestic and international markets, which becomes the primary source of its revenue. As a part of its unique business model, the company does not sell its electric vehicles through third party automobile dealers, instead the customers can order their car directly from Tesla, and can even customize their purchase from their official website. This as a result cuts off the dealers and allows the company to have better control over its supply chain. The base variant Tesla electric car (Model 3) starts from nearly USD 32,000 and whereas the top end Model S can cost more than USD 130,000, depending on the customizations. Tesla has ensured that there is a model in every price bracket, which can attract and encourage a lot of customers to purchase an electric car.

The revenue of Tesla also comes from its superchargers. The superchargers are roadside charging stations that can be used by Tesla owners to charge their vehicles. The company charges a fee from the customers based on the usage, but the average price is USD 0.28 per kWh. This price may vary based on region and electricity rates.

Tesla is constantly expanding its business venture by introducing new products. While pursuing its mission the company is trying to develop new products that run on sustainable energy and can eventually reduce the consumption of fossil fuel. The company started its business from manufacturing and selling electric cars and have now diversified into various other sustainable products as well, such as solar energy generation and home energy storage systems. Moreover, the company has also announced its entry into the commercial vehicle sector by introducing its electric semi-trucks, which can compete with any other traditional fuel-based counter parts. Tesla has also introduced its pick-up truck called Cybertruck, which has turned a lot of heads due to its appealing design, built-in features and performance. This indicates that Tesla is deeply committed to its mission of bringing sustainable energy as mainstream source for the industry.

The experts from write essay service say that the discussion on the business model of Tesla is incomplete without talking about its marketing strategies. The company does not follow any traditional marketing or advertising strategies such as TV commercials, billboards, hoardings, etc. Instead, the company relies mostly on social media and word of mouth. The brand image of Tesla under the leadership of Elon Musk has become so strong that it does not need traditional advertising. Each press event conducted by the company set off a wave of hype and word of mouth, which is enough to create the necessary brand awareness. Moreover, the Tesla often allows social media influencers to review their product which also creates a strong awareness in the market.

It should be noted that this business model of Tesla relies heavily on its brand position. At present, the company holds the leadership position in the electric car industry, which itself is in its infancy stage. The rapid growth of the electric car sector has already attracted various market players, who are trying to offer identical value proposition at competitive prices. The rise in competition in the industry may make it quite challenging for the company to maintain its leadership position. However, being an early adopted and having a strong market share can prove to be really useful for the company while facing the steep competition in the market.

Summing it Up

Before you buy essay online, let us summarize what we have learned so far. Tesla is the leading manufacturer in the electric car sector and expanded its business steadily over the years. The company earns its money primarily from the sale of its electric cars in the target markets. Each of these cars appeal to different demographic segments, while belonging to a wide range of price brackets. Apart from selling electric cars the company also earns from its household energy storage and solar energy systems. Moreover, the supercharger network of the company also contributes to its revenue. The unique business model of Tesla allows the company has allowed it to sell directly to its customers without any car dealership in the middle.

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