The secret of Tesla's high premium
First-principles thinking: subverting traditional stereotypes
In this rapidly changing era, innovation is an inexhaustible driving force for social development. Traditional empirical thinking is difficult to adapt to the changes of the times, and we need a new thinking model with the ability to think deeply and gain insight into the essence of the problem. At the heart of this thinking model is the "first-principles" way of thinking advocated by Musk.
First Principles derive from the ancient Greek philosopher Aristotle: "In every system there is a fundamental proposition that cannot be questioned or violated." Musk applies it to business decision-making, by peeling back the cocoon and reducing complex problems to the most essential base point, so as to find the optimal path to achieve the goal.
This kind of thinking has brought many opportunities for innovation to Musk. More than ten years ago, the price of traditional lithium battery packs remained high for a long time, which seriously affected the popularization process of Tesla's electric vehicles. But Musk is not limited by the status quo, he starts from the origin of the battery pack, thinking about what materials it is composed of? What is the market price of these raw materials? After doing the math, he found that he could make a $600 battery pack for just $80.
With first-principles thinking, Musk has opened up a new battery path for Tesla, dramatically reducing production costs and paving the way for the commercialization of electric vehicles. This way of thinking that simplifies complexity and breaks the mold is the key to Tesla's ability to achieve disruptive innovation in many areas.
Product strategy: high-end first and then mass
Tesla's ability to occupy a high-end position in the EV market is largely due to its unique product strategy. The core concept of this strategy is to start with the high-end to lay the brand's premium gene, and then gradually launch affordable models to achieve scale profits.
It all started with Tesla's first model, the Roadster, in 2006. Not only does this cool electric sports car outperform its contemporaries, but it also costs $90,000, which is comparable to a top-of-the-line sports car. Who wants to pay for it? Musk has set his sights on his "die-hard fans" - the elite circle of Silicon Valley.
As a joint entrepreneur, Musk is already a household name in Silicon Valley. His friends are either top company founders, Hollywood stars or celebrities. With this "social power", Musk successfully persuaded a group of wealthy people, including the founder of Google, to pay for Roadster. In this way, Tesla received $40 million in financing with only a concept car.
The high-premium Roadster won Tesla brand awareness and laid the foundation for future development. Next, Tesla gradually launched high-end models such as Model S and Model X, further consolidating its brand image. It wasn't until 2017, when the popular Model 3 came out, that Tesla really entered the mass market.
This product strategy of "high-end first and then mass" has enabled Tesla to occupy a place in the high-end market without losing profit margins at scale. This is the key to Tesla's ability to fight its way out of the fierce competition.
Marketing strategy: word-of-mouth is king, direct sales are respected
In terms of marketing strategy, Tesla is also quite unique. It abandons the advertising and marketing model of traditional car companies, and instead focuses on word-of-mouth marketing and direct sales.
Unlike other car companies' tens of millions of dollars in advertising, Tesla never advertises. It pays more attention to winning consumers' word-of-mouth recommendations through high-quality products and services. This not only saves a lot of advertising costs, but also helps to enhance brand reputation.
Tesla has also innovatively adopted a direct sales model. Different from the "wholesale sales" model of traditional 4S stores, Tesla separates the links of display, sales, delivery and after-sales, and establishes experience stores and delivery centers in the center of the city to directly face consumers.
The advantage of this model is that the price is transparent, the service is professional, and it can bring a better experience to consumers. Since there is no dealer link, Tesla can also gain greater profit margins. Once the direct sales model was launched, it became the standard configuration of "new cars", almost revolutionizing the life of traditional 4S stores.
With the continuous improvement of brand awareness and sales, Tesla began to adjust its direct sales strategy. It intends to reduce the number of supermarket experience stores, and instead build more outlets similar to 4S stores in traditional automobile business districts to improve exhibition and after-sales service capabilities.
This adjustment aims to reduce the high rent of supermarket experience stores, and at the same time provide Tesla with more professional maintenance conditions. Tesla is gradually improving its marketing system to better adapt to the needs of development.
Technology leadership: moat and core competitiveness
If product strategy and marketing strategy are the key to Tesla's ability to obtain high premiums, then technological leadership is the source of its core competitiveness.
As one of the world's most technologically advanced electric vehicle manufacturers, Tesla is not only leading in core technologies such as batteries and electric motors, but also has obvious advantages in the field of autonomous driving. These cutting-edge technologies have earned Tesla greater profit margins.
In the case of battery technology, for example, Tesla's battery cell cost in the U.S. market is only $142 per kilowatt hour, while the average for the entire electric vehicle industry is as high as $186. Compared to the industry average, Tesla's battery cell cost is nearly a quarter lower.
In addition to batteries, Tesla is also leading the way in new technologies such as 4680 batteries and cast bodies, which will further reduce its manufacturing costs. Tesla's technical reserves in the field of autonomous driving will also inject new impetus into its future development.
It is with these leading core technologies that Tesla can stand out from its peers and gain higher premium capabilities. Technology is Tesla's biggest moat and will be an important support for it to win a larger market share.
The future is promising: new models, new business
Tesla's future is bright. It will not only launch more new models to consolidate its existing advantages, but also expand into new business areas and inject new impetus into the company's development.
Not long ago, Tesla announced that it will launch a new affordable model in late 2024 or early 2025, with an expected starting price of only around $25,000. The new car, which is unofficially called the "Model 2", is expected to be the best choice for consumers to get started with Tesla.
Tesla also revealed that it will launch a "dedicated unmanned self-driving taxi product" and plans to create a "revolutionary" manufacturing process. Although the specific details have not yet been announced, this will undoubtedly open up a new business growth point for Tesla.
Tesla has also made great strides in building production capacity for its electric pickup truck, the Cybertruck. Its Gigafactory in Texas began production of the Cybertruck in April, and production capacity is gradually ramping up. The advent of this new model will further expand Tesla's market coverage.
Solar energy and energy storage business are also important directions for Tesla's future development. As a technology company pursuing sustainable development, Tesla will have a lot to offer in these areas.
Tesla is actively expanding its product line and business territory to lay a solid foundation for the company's long-term development. As long as the pace of innovation is maintained, Tesla will definitely go further and further on the road of development in the future.