Is Tesla a well-managed business?

As we all know the mainstream media and social media rhetoric regarding Tesla is continuous and raucous. There seem to be passionate environmentalists and Tesla owners on one side, oil-loving short sellers on the other. The former is perhaps too enthusiastic when it comes to Tesla’s actual business management, and the latter is also obviously motivated to tank the stock.

Before I offer what I hope will be a substantial analysis let me state my qualifications. My 30-year business career permitted me to work with people in more than 100 cities as a consumer marketing and B2B marketing executive for Tyco, Bata Global and other multinationals, and also as an advertising agency creative director, handling well-known international consumer and technical brands. I studied business management and international economics at Ryerson University in Toronto.

In the past 15 years I have become biased in favour of Tesla as an environment writer, but this analysis is not about the Tesla mission, nor is it about stock that I hold in the company, because I don’t hold any. This is strictly context for what is publicly known about Tesla business management.

For those who don’t want to read too long, here’s a handy chart that uses an old business school tool, the SWOT analysis.


Market share Tesla has a 50% – 70% share of the electric vehicle market in countries where it is active. As any business analyst will tell you, holding the leadership position in a market brings with it many quantifiable advantages and these values increase if the category is shown to be new and disrupting an established industry. Until recently some may have been able to argue that electric vehicles are not disrupting the auto industry, but that is certainly unlikely now. I’m not going to cite all the evidence, because I think it’s obvious.

Talent & technology Some of the more nebulous measures of business value are talent, technology, and an obsessive commitment to product quality. It’s difficult to measure their value, and hard to verify the claim that you have superiority in these areas. But I believe it would be pretty easy to make the case that Tesla is ahead of its competitors in all three of these categories. That’s why Tesla products are consistently rated number one in quality. The established auto companies might say they have more talent, but they would be talking about people with experience in the field of internal combustion engines, not computers & batteries on wheels, which is essentially what a modern electric car has become.

Brand loyalty There is an army of marketing analysts who calculate the value of a brand using various criteria, formulae, algorithms etc. I’m not one of them, but brand loyalty is something they include in their calculations. Some of the established automakers undoubtedly enjoy brand loyalty, but in the electric vehicle segment none of them are in the same ballpark with Tesla.

Sales process In terms of sales and marketing, the Tesla story gets really interesting because they are completely disrupting this model too. It hasn’t been perfect. They’ve tried a few things with their ‘Tesla stores’ and then changed them later. Still, most of their sales orders are placed online and don’t involve bricks and mortar operations (one report 78%), so the only comparison we have for sales is between a traditional auto dealership and online car purchases. As far as I’ve been able to determine, among original manufacturers of electric vehicles in North America, only Tesla sells vehicles online without dealer involvement. 

Secondly, because most Tesla sales orders are placed online, a huge sales distribution cost (dealerships) is completely eliminated. Until other car companies offer or improve their online sales, or unless Tesla finds a reason to invest more in stores, the online sales order process is another big Tesla cost advantage. Part of the reason that Tesla cars are enjoying an adoption ramp is because their relatively high ticket price does not suffer much from added commissions and margins. For example, all Tesla stores are owned by Tesla, not by third parties.

Marketing In the marketing area, Tesla is good at inexpensive social media and has limited its involvement in traditional costlier promotional tools and channels. In the electric vehicle segment they have few social media rivals. However advertising and marketing to consumers should be an area in which traditional car companies find an opening. Traditional automakers have always been strong in this domain. They are also extremely experienced with global mass marketing, managing global advertising spending and with television. Traditional television is still an incredibly powerful force and marketers are evolving their approach for younger generations and online distribution.

A few non-Tesla electric vehicle television spots have, in 2019, begun to emerge. They can be used on television and appeal to older generations, and it remains to be seen if they can be styled for YouTube and become a force on social media. What we do know is that online video far outperforms other forms of online promotion; but we also know that younger generations respond to a different style of pitch than is usually seen on television.

Sometimes we regard the future of personal transportation as strictly a battle between electric and gas, but it’s also between 100% vehicle ownership and other, shared transportation concepts. Experts say that up until now a personal car sits parked for 90% or 95% of the time; and that younger, especially urban people have far less interest in car ownership than older generations. Superiority among manufacturers or other entities on shared, autonomous, creatively designed vehicles has yet to be established, but my guess is that the thinking in this area is more advanced at Tesla than at the more traditional car companies.

Distribution & service The early data from consumer studies and fleet managers suggests that electric vehicles require 60% – 80% less maintenance. Enthusiasts like me quote the higher number, but over the long run it might be 60%. This is still significant and the key reason that dealerships hate electric cars. They must evolve or die. In fact, their future might already be sealed, between this reduced level of service and the preference of many customers for online purchasing and trouble-free home delivery, that completely cuts the dealer or store out of the transaction. 

Tesla has been undertaking home delivery in order to hit its numbers and satisfy shareholders, and this may or may not turn into a sustainable business practice. At the moment it’s a huge plus for Tesla, but all auto companies will have to evolve their online/car store/dealership/service model to meet the changing needs of transportation customers.

Manufacturing robotics All car companies use robotics, and as a general rule of thumb the engineering of this equipment is continuously improving. Tesla has a learning curve jump on everyone else when it comes to robotically assembling electric vehicles, which along with Tesla’s early moves on lithium batteries allows the company to be already profitable on the cars themselves. Tesla also has the modern outlook of a contemporary start-up and a great engineering team. Other companies are struggling in this area, but other car companies have decades of assembly line experience and plenty of expertise. This catch-up shouldn’t be difficult, once the commitment is made. Apparently the Volkswagen Zwickau plant (330,000 vehicles) in Germany will be a great test case for this.

Simplified product portfolio My knowledge of the demands of global car marketing is not deep enough to comment on how broad a brand or model portfolio should be for success, but simple businesses are usually more profitable. That’s why car companies standardize everything through their supply chain. As Tesla fills what it perceives are the holes in its offering, it will be interesting to see if it falls into the trap of multi-nationals who try to be all things to all people. Right now it is acting like Apple, balancing its own vision of the future against voluminous commentary from customers, and in the end, keeping it simple.

Sound export strategy Tesla has been nothing short of brilliant in its approach to foreign and domestic market strategy. It has built a strong following in home country USA, while identifying priority markets elsewhere and cautiously expanding. The moves into Europe and China are as critical to the company’s success as anything else it has undertaken. Striking a deal with China for support as it pursues the high-end customer there, is a master stroke in a place where they need no help with the mass market, but crave learning partnerships. Other car companies (and economists and governments), who still don’t seem to fully understand the concept of open patents, might have something to learn here.

The expansion into Europe and China also allows Tesla to extend it’s leadership position in the global EV sector, capitalize on the low hanging fruit of early adopters, advance its mission and brand footprint, and put pressure on USA jurisdictions who have not welcomed electric vehicles. The circle of transportation-related clean energy success (healthier cities, cost & traffic efficiencies) around US laggards will eventually tighten like a noose. Europeans and Chinese are more culturally accepting of electric vehicles than some North American regions, which also makes this expansion a smart move.

The partnership with China has far-reaching economic implications, due to the volume possibilities. Reports say the new plant can make at least 60,000 vehicles, but it’s not a stretch to imagine success for Tesla in the Chinese market far beyond this number in the not-too-distant future. This will provide the absolute financial stability that will underpin Tesla’s recovery of the capital and expansion investments that are ludicrously controversial among disingenuous Wall Streeters. China is one of the keys to washing away investment skeptics, and trouncing big oil at the same time.

Meanwhile the walk in the park that Europe is becoming for Tesla, combined with dieselgate and carbon offsets, is shaking the German auto engineering community to its foundation. Everything that was wrong with European car manufacturing is quickly being corrected. As with everything in European business, it’s complicated, and difficult to predict. It might be better for everyone if Tesla eventually loses in Europe, or partners with the current establishment. Suffice it to say that Tesla is going to make some money there, and change the European auto industry.

Secure supply chain I’m on thin ice listing supply chain as a strength for Tesla, however, so far Tesla has done what it needs to do as it literally invents mass EV manufacturing and a supply chain to go with it. The slightly broken Musk promises about production volumes have been minor sins compared to massive neglect shown elsewhere both within and outside the automotive business. For the most part they have rankled investors more than customers. It should be noted: not much recall action with Tesla vehicles. 

Musk has complained about domestic component bottlenecks, and has struck deals for lithium with Australian and Chilean companies. Supply chain management, sourcing materials like lithium, nickel and copper, battery production integration –It’s complex. There are no shortage of people who will be happy to tell you that Toyota or General Motors are much better at this than Tesla. I think it’s too early to say in the EV sector.

Vertical integration Again this is arguable as a strength, but sensible with a start-up. To some extent in supply chain management, the legal entities don’t matter much, but relationships and data analysis matter a great deal. Companies need to continuously re-evaluate JIT and other inventory policies, not only from a financial perspective, but from a brand impact perspective. Vertical integration can create unneeded distraction from core competencies, but it does offer some control over cost equations. Although they all do it, there is generally a greater likelihood of seeing solar panels on the roof of a Tesla factory than those of other manufacturers. I consider on-site renewable generation to be a sign of sound long-term thinking on the part of management. At this point in the history of the startup I think the vertical integration decisions have been good ones, because at worst, a little further down the global growth trajectory they might become emergency redundancy.

Innovation culture & resulting business segments The youth and engineering vision of the Tesla CEO pervade the organization in a positive way. Tesla’s achievements make this obvious (and so do some of Elon’s so-called, humanizing follies). I have many questions about Spacex, which seems to be both a big negative risk and a big positive bet. It is also, mercifully, a separate legal entity from Tesla, and a logical extension from an engineering and innovation perspective. 

The other segments offer superb potential for the times in which we live: disruptive utility, microgrid and home electricity storage, disruptive integrated rooftop solar, disruptive mass transit, and artificial intelligence. They also offer strong marketing package/program possibilities. Just like electric vehicles, these products will change the way we live and the way we think about the technology in our lives. In addition, they are both new businesses with strong marketing upsides, and business models that are immediately understandable, even by conventional thinkers.

When we use the word innovation we think of someone who is wildly creative, but in business creativity must be tempered by pragmatic final decisions, based on customer relationship systems, reliable pilot tests and data analysis. ‘Customer relationship systems’ is a convoluted way of saying that you should hang out with your customers, talk to them, listen to them and ensure the whole team is doing this all the time, even if formal input structures must be created to make sure. Strangely, the Tesla social media world achieves most of this, but it shouldn’t be taken for granted, and additional measures are also important.

I don’t know how Elon Musk and his team arrive at strategic decisions, but based on the outcomes, it appears they begin with blue sky brainstorming and end with rigorous critical analysis. When this becomes a process, and then a cultural characteristic, it becomes a force to be reckoned with in any field of endeavor. The culture of innovation and experimentation at Tesla is definitely a plus and business strength.

Cash burn The classic startup struggle is to find ways to temper enthusiasm and invest in the right things at the right time. And there is simply no way that you can disrupt a complicated industry like automobile manufacturing without blowing through some dough. At present a personal automobile can still be called a very big ticket item and for some time may continue to be the second biggest purchase in an average person’s life. The dollar amounts, customer expectations, manufacturing and distribution challenges will continue to be huge for the forseeable future, making it a completely daunting business to enter, let alone disrupt.

Cash burn is an almost unavoidable threat or a weakness for Tesla. Elon has used internal communications, and timely layoffs, (and NDAs) to try to grapple with it; but the truth is it will loom for some years. During a few quarters he has tried to show a profit, to drive home the point that the car manufacturing itself can already be accomplished profitably. 

Persistent misinformation Tesla’s competitors and oil business enemies are well resourced and remorseless. Their missions are diametrically opposed to Tesla’s mission. It’s all out war. Regulation, litigation and misinformation are all weapons, and corrupt politicians are sometimes more than pawns in the battle.

Anyone on Twitter knows the trolls, paid lobbyists and macho morons are everywhere. And it matters. When I talk to ordinary fleet managers, homeowners and investors, it’s clear that they are being led astray by persistent mainstream and social media disinformation. Correcting the myths is exhausting because most of the people who care to do so are not being paid for the effort, while their foes are being handsomely compensated. The volume of BS is quite alarming, particularly because well-meaning people fall for it, and sleepwalking weak media people sometimes just make it worse. 

The biggest danger is that persistent myths gain traction among the public and among regulators. It’s a real threat that requires a committed response. I’m concerned that not enough is being done by Tesla to win these battles for public consciousness, because the most unexpected story could blow up, become uncontrollable and do extensive damage.

The main strategy of the spinners is to delay rather than debate. That’s because if you get into the weeds of the discussion, it is apparent to everyone that the shift to EVs is inevitable and rational. The entrenched interests seek only to create short-term obstacles and excuses for as long as they can. Delays are deadly in the current environment because if a world event like a major war, recession or pandemic coincides with too much negative PR, the electric car could indeed be killed again.

Despite the possibility, I doubt that this will happen. However, even well beyond the tipping point of EV adoption we will hear these voices, as long as the cost of the spinner fits within the marcomm budget of the gas car producer. Tesla and others must create budgets to combat these assaults. They must create a strategy to pit the large conventional car companies who are trying to move into EVs against the oil companies. Divide and conquer.

Public company Elon’s instincts were correct a year ago. Tesla should repurchase as much stock as it can. I think most of the vocal short sellers are also working for big oil. The effort to crush Tesla is far from over. Until the society smashes the oil companies themselves with divestment, lawsuits and regulations, there will be no solution to the insidious efforts to infiltrate and destroy Tesla. After all, it is the avenue to a new world in which oil companies are reduced to tiny entities. Tesla is the single biggest threat to the existence of the largest, most powerful companies in the world.

Innovation culture The innovation culture within Tesla’s senior management might also be seen as a weakness. You can’t win if you don’t place a bet, but the longer you gamble, the more often the house wins. If Tesla was just a fun company selling “Not a flame thrower” for profit and had no other mission, it wouldn’t matter. But it’s not. If we consider the war described above, we understand that these are critical years for Tesla, and therefore, for the planet. Little mistakes, sure, but don’t make any big ones. Tesla is doing great, but it’s a highly creative place that remains vulnerable to unforced errors.

Mission/positioning conflict and price wars I think it’s very important that Tesla diversifies its product portfolio by price point and manages it marketing messaging accordingly. For years it was a quaint quality-obsessed boutique player. Then it announced an electric car for under $40k. That may not have been a big deal to Tesla management, but it was a public relations breakthrough. Tesla can get away with pushing delivery deadlines, but the promise of an affordable electric personal automobile made by a firm with an established record of quality cannot be broken or much delayed. That single promise makes Tesla a player in the automobile world. Offering cars for both luxury and everyday buyers is something that the legacy automakers know how to do and they will score victories if Tesla fumbles this key positioning strategy.

Because it will be pursuing mostly the luxury market in countries like China and perhaps, later, India, it will be very important to avoid internal confusion and ensure that the positioning strategy is well understood in each market and each customer segment. A few years down the road, in a price war between Volkswagen and quality obsessed Tesla, it might not be irrational to bet on VW as the winner.

Succession strategy I hope it’s clear, that although I am floating some troublesome scenarios and pointing out some vulnerabilities, I see Tesla as a very well-managed business. That’s why I’m convinced that short-sellers are backed by oil interests. A truly qualified business analyst or investor could never look at what is known about Tesla and conclude that it should not be a ‘buy’ on the street.

Anyone with any experience with corporate success can see that Elon Musk is a visionary person, an excellent engineer, a capable manager and a formidable business strategist. He’s extremely valuable to Tesla and the other companies he runs. I’m worried that he is not building a team of people around him who feel motivated to carry on the mission and learn from his brilliance, in case anything happens to him. What could happen? Stress, scandal, sickness, unforced errors; to name a few tragic possibilities. He has a lot of powerful enemies that want him to fail.

If he builds a strong team of like-minded, gifted people around him, it makes him less of a target, because the enemies soon realize that any one of them can push the electric vehicle movement ahead. It protects Elon from stupid attacks by enemies and because it ensures a happy ending to his story, it protects his personal legacy. He should care deeply about these two things and he should make sure he has a sound succession strategy in place to take some of the pressure off himself. It’s hard for driven, brilliant people to relax and celebrate, but he should already be doing a bit more of it, while grooming others to make life easier for himself and make the company and its mission completely invincible.

But I digress. Let’s set aside aside the company mission and return to the main question. Is Tesla a well-managed business? It’s vulnerabilities are minor compared with its strengths. Its market leadership, talent, product quality, manufacturing technology, supply chain stability, strong expansion strategy, innovative culture and available opportunities all suggest that Tesla is a well-managed company. It’s a very well managed company, far better managed than most.

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