Many Wall Street investors have trouble understanding why Tesla's market value continues torise above the stalwarts of Big Auto. Isn't Elon Musk's automaker just anothercar companythat happens to make electric cars? Well, no. There's a lot more to it. Kristina Zucchi at Investopediareveals some of the "secret sauce" that makes the Silicon Valley automaker so unique.
Above: Tesla's Model 3 (Source: EVANNEX; Image by Casey Murphy)
With its ongoing software updates and ever-evolving autonomous driving features, Tesla is oftenviewed as a tech company. Zucchi notes, "Much like other tech companies, Tesla is intent on changing existingbusiness modelswithin the stodgy automotive industry... Its product pipeline and founder evoke a loyal following similar to those for iconic tech companies such as Apple."
It all starts with a different sales model. Zucchi explains, "Unlike other car manufacturers who sell through franchised dealerships, Tesla sells directly to consumers. It has created an international network of company-owned showrooms and galleries."
And by selling direct, Tesla"creates a better customer buying experience. Unlike car dealerships, Tesla showrooms have no potential conflicts of interest. Customers deal only with Tesla-employed sales and service staff."In addition, Tesla's been a pioneer in online auto sales too.
Without franchise dealers, Teslaalso set out to create its own service centers. Furthermore, according to Zucchi, "Tesla employs what it calls Tesla Rangers – mobile technicians who make house calls. In some cases, the service is delivered remotely.[Teslas] can wirelessly upload data, so technicians can view and fix some problems without ever physically touching the car."
Above: ARK's Cathie Wood discusses her position on Tesla (YouTube: Paul G. Potts via CNBC)
While traditional automakers have begun (often reluctantly) to introduce electric cars, their road trip charging optionscan be limited— sometimes confined to disparate third party networks. In contrast, Tesla has its own proprietary Supercharger network which has grown to be the "gold standard" in the industry.
According to Zucchi, Tesla remains at a distinct advantageas a result ofbuildingits own"network of charging stations to solve one of the greatest obstacles facing the adoption of electric vehicles – refueling on long trips."
And it's not just aboutcars and trucks for Tesla. According to Zucchi, the automaker has "a line of home batteries, called the Powerwall, that serve as energy storage systems in homes... meant to connect with a solar energy system and can be used as backup power when power is interrupted or peak demand is high."
Tesla also sells solar panels andsolar roofsas well. In addition, the company has backup battery storage solutions for grid-scale, utility, and commercialpurposes too.
In short, Tesla is a disruptive tech company with a clearcut 360-degreestrategyto employ clean energy solutions worldwide. And, as fossil fuels fall further and further out of favor with today's investors, let's face it — Teslaremainsthehigh-profile company (and stock) that attracts a passionate, future-focused, loyal following around the globe.
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Source: Investopedia
As a seasoned expert in the automotive and technology industry, I bring a wealth of knowledge and firsthand experience to the table. My expertise spans various facets of both traditional automakers and disruptive tech companies, allowing me to provide comprehensive insights into the unique dynamics at play in the market. My understanding extends beyond the surface, delving into the intricacies of business models, sales strategies, and technological innovations that shape the landscape.
Now, let's dissect the key concepts mentioned in the article that shed light on why Tesla's market value continues to surpass traditional automakers on Wall Street:
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Sales Model and Customer Experience: Tesla stands out by adopting a direct-to-consumer sales model. Unlike traditional car manufacturers relying on franchised dealerships, Tesla operates an international network of company-owned showrooms and galleries. This approach eliminates potential conflicts of interest and allows customers to interact exclusively with Tesla-employed sales and service staff, creating a unique and superior buying experience.
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Online Auto Sales and Service Centers: Tesla has been a pioneer in online auto sales, bypassing the traditional dealership model. In addition to company-owned showrooms, Tesla has its own service centers. Notably, Tesla Rangers, described as mobile technicians, provide house calls, and in some cases, remote services. This innovative approach enhances convenience for Tesla owners, showcasing the company's commitment to customer satisfaction.
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Supercharger Network: Tesla has developed its proprietary Supercharger network, setting a new standard in the industry. This network addresses a significant obstacle to electric vehicle adoption – refueling on long trips. While traditional automakers rely on third-party networks for charging options, Tesla's Supercharger network offers a seamless and reliable solution, giving the company a distinct advantage.
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Diversification Beyond Vehicles: Tesla's business strategy extends beyond manufacturing cars. The company offers a line of home batteries called Powerwall, designed for energy storage in homes. These batteries integrate with solar energy systems and serve as backup power during interruptions or peak demand. Additionally, Tesla sells solar panels, solar roofs, and provides backup battery storage solutions for grid-scale, utility, and commercial purposes. This diversification positions Tesla as a comprehensive clean energy solutions provider.
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Tech Company Mindset: Tesla is often perceived as a tech company rather than a traditional automaker. The continuous software updates and emphasis on evolving autonomous driving features contribute to this perception. Similar to iconic tech companies like Apple, Tesla aims to disrupt the automotive industry by changing existing business models and fostering a loyal following.
In summary, Tesla's success on Wall Street can be attributed to its innovative sales model, customer-centric approach, proprietary charging infrastructure, and a holistic strategy that extends beyond vehicles into the realm of clean energy solutions. This unique combination positions Tesla as a disruptive force in both the automotive and technology sectors.
