Tesla creates their own niche in the electric vehicles(EV) market. Their innovative business model provides technological advantage through innovative vehicles, batteries, infrastructure and their value configuration. This technological advance could be used for valuable market offering and for gaining competitive advantage.
Tesla is an entrepreneurial company, and thus it has the freedom to use new business models. The analysis will be conducted by incorporating the principles of business model into the following four innovation categories that this entrepreneurial company offers. This entrepreneurial company has produced three types of vehicles. They are planning to differentiate with another 5 vehicles. The value proposition of the vehicles are the sporty performance and the new set of technology. In their customer segment, Tesla is different than its competitors. All of the type of cars they offer are on the high-end, and therefore attract a high-end niche market.
However, this July started the production of the most affordable Tesla car yet, the Model 3. This differentiation of products would allow for capturing more market segments and direct competition with other car manufacturers in the low segment of the EV market. Tesla also created an innovative distribution channel which allows for direct purchase: online and through their own showrooms for non-negotiable price. The second important component which Tesla brings to the market is the innovation of type of their batteries.
The value proposition for the batteries is bigger batteries with better efficiency. Additionally, consumers have control over their batteries by being able to warm them up in case of cold conditions prior to starting their day. The Revenue model for the batteries is that they are sold with the car, and new batteries could be purchased from Tesla when the life of the old one is close to an end. The third important component of the business model of Tesla is the development of its infrastructure system. The innovative idea of creating a network of supercharger stations around the world would decrease the consumer’s anxiety for range. The value proposition of the network of superchargers is their performance.
Additionally, the property of having a built-in map of all supercharger stations adds up to the value proposition. Tesla builds and owns the distribution channel for the infrastructure system. The Revenue model for the infrastructure is the following. All of the cars that had been built after 15th of January 2017 will be charged a small amount. Tesla makes innovation towards the value configuration of their business model.
Unlike other EV companies, Tesla packs and assembles their battery cells and does their energy management. Moreover, they create a closed cycle in which they offer all components. The value proposition is that Tesla has integrated value configuration which captures all activities. Tesla has all components of the value chain except producing their own battery cells.
At the moment Panasonic produces the battery cells for Tesla, however by 2018 Tesla will create its own factory in Nevada for battery cells, and thus have a complete value chain.