For years, potential competitors kept an eye on Tesla as it absorbed all the risk of creating a viable market for electric vehicles.
While the electric-vehicle market hovers in the single digits, the conventional wisdom was that Tesla would exhaust itself proving that consumers actually wanted to go electric.
But with the EV market now poised to rapidly grow, Tesla finds itself with the most powerful brand, nurtured for more than a decade by charismatic, controversial CEO Elon Musk.
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In the car business, it’s often said that brands are grand, but products pay the bills. In other words, you can capture or retain customers with what your company stands for, but long-term, if you don’t have great vehicles, you’re going to have a problem.
For almost its entire history, more than 15 years, Tesla has inverted that wisdom. A few years ago, the carmaker was barely selling any vehicles relative to its global competitors. Last year, Tesla delivered only about 250,000 vehicles, while General Motors sold almost 8 million.
Investors have decided that this means Tesla should be worth $300 billion in market capitalization, more valuable than GM, Ford, and Fiat Chrysler Automobiles combined — and topping Volkswagen and Toyota, the two biggest automakers on Earth.
Vehicle sales obviously don’t add up to $300 billion in value; Tesla’s quarterly revenue remains far below a Detroit Big Three car company. It’s a bet on the future, and a prediction that Tesla should be able to expand its near-monopoly of the EV market as that market grows from a currently tiny basis, merely 1-2% of worldwide sales.
Investor optimism is that Tesla will maintain a dominant share, increase it scale, and notch enviable profit margins, perhaps more than 10% (high-volume luxury carmakers operate at that level, while mass-market companies run in the single-digit range).
But for now, the Tesla brand is mighty. Here’s how that happened:
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The Tesla brand predates its first vehicle. But it was the original Roadster that announced Tesla’s objectives to the world in the mid-2000s.
The Roadster combined high-performance with a save-the-planet mission.
The previously best-known electric car was the innovative EV1, introduced in the 1990s, but infamously killed by General Motors.
The original Tesla Roadster, with its sub-4-second 0-to-60 mph time, proved that an electric car could be more than a glorified golf cart.
The mission was clear, but it needed a compelling megaphone in the person of CEO Elon Musk. After selling PayPal to eBay in 2002, Musk sunk hundreds of millions of dollars into Tesla and other futuristic ventures.
Musk cultivated the image of a maverick nerd who lived by his own rules.
His brand-building wasn’t limited to Tesla. With SpaceX, he sought to make humanity “multi-planetary,” to “back up the biosphere” by ushering in a new age of private spaceflight, with an ultimate goal of colonizing Mars.
He was like a science-fiction film character, at times a hero, at times something of a villain — or at least a controversial …read more
Source:: Business Insider