Tesla’s Disruption in the Automotive Sector

Topic: Industry
Words: 1413 Pages: 5

Tesla, a forerunner in the electronic vehicle industry, has proved that an electric car can be created without the established infrastructure and technical expertise associated with larger automakers. As a consequence, the company is an exciting firm to analyze, and its importance as a disruptive force in the automotive sector validates the in-depth examination outlined in this paper. On the other hand, the company has its own problems.

Tesla’s primary competitor is Volkswagen, Renault-Nissan ad BMW all of which have comparable financial resources. Tesla is technologically inferior to these enterprises, which makes them a threat. Traditional car manufacturers are continually extending not only their hybrid gasoline-electric car but also all -electric vehicle products. Another difficulty facing electric vehicles on the mass market is competition from Neighborhood Electric Vehicles (NEVs). Many people prefer NEVs due to their affordability and adaptability. NEVs offer a lesser level of performance at a lower price point than Tesla, which offers a better level of performance at a higher price point.

Since the organization’s establishment, competition has been viewed as the primary issue. To address the issue, the company has regularly upgraded the product throughout time. The activities focused mostly on software upgrades, performance enhancements, driving experience enhancements, and finally, power and overall performance optimization. Additionally, the firm has sought to surpass competitors by investing in secondary aspects of the vehicle, for instance upgrading the vehicle’s appearance and requesting one-on-one customer feedback. This will result in a boost in sales, as consumers will be enthusiastic to purchase high-quality products while they wait for an even better improvement. Tesla would be able to deliver greater services even after the cars are sold because of the one-on-one connection with clients.

Tesla, Inc. is an American automobile and energy firm headquartered in California. Through its SolarCity subsidiary, the firm focuses on electric vehicle manufacturing as well as solar panel production (Burns, 2015). It manages several production and assembly lines, including Nevada and the Tesla Factory in California, where it makes its automobiles. As of 2019, the company sells the Tesla Model S, X, and 3. (Motors, 2015). Additionally, Tesla sells batteries that includes the Powerpack and Megapack as well as solar panels and roof tiles.

Martin Eberhard and Marc Tarpenning founded Tesla Motors in July 2003, and they supported the firm until they raised their first round of funding in May 2004. They were forced to start the company as a result of the 2003 recall and destruction of all EV1 electric automobiles by General Motors. Elon Musk led the Series A round of fundraising in 2004, becoming chairman of Tesla’s board of directors. For Tesla, the most important goal was to convince people to buy electric cars, first with a high-end sports car aimed at early consumers and progressing to more popular models like sedans and small, reasonably priced cars When asked about Tesla Motors, Musk said that he sees the company as a technological and independent car manufacturer that will one day make electric automobiles affordable to the general public. Tesla Motors changed its name to Tesla in February 2017.

Musk became aware that firms such as General Motors were not producing electric vehicles as successfully as they might, which prompted him to enter the market for such vehicles. In the words of Musk, “the single largest macro issue that humanity faces this century is solving the renewable energy problem — that is, ensuring the sustainable production and consumption of energy,” but rather than waiting for a solution, Musk believes that “the only way I could think of to address that was through innovation.”

The company’s business plan is to adhere to recognized technological product life cycles and to start with wealthy customers before expanding into bigger markets at a lower price point. The Roadster was a limited-edition model with a US$109,000 price tag. The Model S and X were created with a broader upscale customer in mind. Model 3 and Y are aimed at a larger market (Motors, 2015). This is a common business strategy in the technology sector. “Any new technology requires several iterations before reaching the mass market,” Musk wrote on his blog, “and in this case, it is competing with 150 years and trillions of dollars invested in gasoline automobiles.”

Unlike most companies which sell their vehicles through the conventional dealer networks, Tesla company sells their products online and in their showrooms. As part of its e-commerce plan, customers may personalize and order their products online (Motors, 2015). Tesla allows the use of its technological patents by anyone who acts in good faith. Not to sue Tesla for patent infringement or steal its designs (Burns, 2015). Tesla maintained control over its other intellectual property, like as trademarks in order to prevent its breakthroughs from being immediately duplicated by competitors.

Tesla has been up against fierce competition from other automakers. Fisker Automotive, for example, is a strong competitor to Tesla. Fisker at the moment offers only a single model, the Karma, which features the capability to “switch between all-electric Stealth Mode and fuel-assisted Sport Mode with a single paddle movement.” Karma’s luxury, efficiency, and properties work together to create a vehicle similar to Tesla (Bhardwaj et al., 2020). Fisker automotive looks like a worthy competitor to Tesla.

Tesla Motors’ indirect competitors include Lexus, Porsche and BMW. BMV at the moment offers an Active Hybrid both to its 7 and 5 series automobile. The 750i Active Hybrid is priced at approximately $97,000 while the 750Li is priced at nearly $100,000 (Bhardwaj et al., 2020). The Active Hybrid 5 will offer direct competition to Tesla’s model, with a starting price of around $60,000. Lexus offers five hybrid models: CT, GS, LS, RX, and HS. The CT Hybrid costs approximately $30,000, while the LS Hybrid is nearly $112,000. The Lexus GS sedan, which begins at $60,000, will fight for market share with Tesla’s Model S.

Tesla Motors’ competitive edge is based on its core expertise of designing and producing all-electric automobiles. As per to Fisker, the Karma’s range is three hundred miles, which is comparable to Tesla’s eighty-five-kilowatt hour battery option. Since the Karma is offered in both electric and gasoline-powered configurations, only fifty of the three hundred miles can be accredited to the electric driving range. The company has a great brand image in comparison to its indirect competitors. Tesla is well-known for providing high-end electric vehicles, but its competitors’ offers are sometimes hidden among the company’s other products.

Tesla competes with competitors in the area due to the enormous brand awareness that Tesla has previously created in old markets. Its brand recognition is aided by the increasing number of Tesla agreements in the USA. Consumers will be unable to physically touch the vehicle if there are insufficient dealerships. Because electric car technology is still in its infancy, rivals benefit significantly from the opportunity to test drive models fast. Additionally, these competitors have an established consumer ground from which they can recruit new users (Stringham et al., 2015). While this can work on their advantage in product promotion, it can also work against competitors if the brand name has ever received any negative publicity before. Their competitors, instead, have a lot of more to spend on not only marketing but also promotion to develop a positive image, owing to the success of their conventional vehicles. Tesla has increased its marketing operations and promotion campaigns each year, but the company’s cash reserves are restricted due to the considerable amount of research and development required to make sure it comes out with the most innovative electric vehicle technology.

The Model S is a luxury sedan built for enthusiasts seeking the difference of a Tesla Roadster at a price that is compared to a conventional luxury car. With a starting price of $50,000, other businesses attempted to compete by offering similarly priced hybrids. While no company can match Tesla Motors’ 300 miles on a single charge, the range of these hybrids is increasing (Stringham et al., 2015). Due to their larger budgets than Tesla, these other corporations will almost probably invest more in research and development to keep up with Tesla’s technology. Mercedes-Benz and BMW will gain an advantage over Tesla as the technical gap closes. The companies will profit from economies of scale as a result of their modern manufacturing facilities, allowing them to conduct mass production at lower costs. Tesla, as a company, will need to remain imaginative and differentiate itself regularly to preserve its leadership position in the sector.


Bhardwaj, S., Pandey, R., Sharma, S., Sejal, S., Iyer, G., Sharma, S.,… & Kulkarni, S. (2020). Problems Faced by Automobile Industries: Case Study on Tesla. International Journal of Tourism and hospitality in the Asia Pacific (IJTHAP), 3(2), 78-88.

Burns, M. (2015). A Brief History of Tesla. TechCrunch. Retrieved June, 11.

Motors, T. (2015). About Tesla.

Stringham, E. P., Miller, J. K., & Clark, J. R. (2015). Overcoming barriers to entry in an established industry: Tesla Motors. California Management Review, 57(4), 85-103.

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