Tesla is unique as a car company!
Good morning dear readers of Tecnogalaxy, today we will talk about Tesla that invests only in development and research, and not in advertising and still sells like other car industries that invest millions.
Cars and advertising are symbiotic industries. The automotive industry has spent over $14 billion on advertising in the United States, second only to the (much more fragmented) retail sector. Car manufacturers advertise by every means imaginable, from TV to radio, from printing to billboards to the Internet, not to mention product placements, dealer support, public relations, press releases and massive political contributions.
Indeed, considering that legacy automakers entrust most of their car components, and in some cases even final assembly, to other companies, it is no exaggeration to say that marketing and advertising are their main functions.
But there is a car company that does not spend anything for traditional advertising (although it deals with events and other marketing efforts). And how did this company do on the market? Well, it has grown rapidly to become the world’s largest automaker by market capitalization, its vehicles consistently surpass competing models in their segments and has one of the strongest brands in marketing history, right there with Harley-Davidson.
So does this mean that you don’t need massive advertising expenses for automotive success? Well, it does seem that way. Does this mean that automakers have squandered billions on unproductive activities in the last century? Well, it could be. What else could companies have invested their money in all this time and how could they improve their products accordingly? Obviously in development and research.
The amounts per vehicle spent on advertising and research and development from some of the leading automakers and there is some interesting information. The data, which come from the official documents of the companies, cover the automotive market. Of the five car manufacturers considered, all except Tesla spend considerable sums on advertising, an average of $495 per vehicle sold. Everyone also invests in research and development to improve their products, but nobody spends as much as Tesla.
For every car it sells, the California trendsetter invests $2,984 in research and development. This figure is higher than the investment of the three great Americans put together. It’s 2.5 times as much as Ford, the second place he spends on R&D, and almost 4 times as much as Chrysler. Interestingly, Chrysler is also the one that spends the most on advertising: $664 for vehicle.
It’s no coincidence that Tesla’s vehicles are the most advanced on the road and that legacy brands are widely regarded with at least five years behind Tesla in battery and software technology. Could they bridge the gap by moving money from advertising budget to research and development center?!
“The balance of expenditure between research and development and advertising is part of the allocation of capital, a decision that every company must make,” he says. “In general, more research and development can improve and advance the quality of your goods or services, compared to your competitors. If executed correctly, it has the potential to lead to increased pricing power”.
Car executives are calling crisis meetings, and one has even asked the industry’s famous multi-billion dollar, Elon Musk, for ideas on how to scale such a difficult market for new entry, as is still partly the case.
This is all about Tesla and from the craziest billionaire ever, Elon Musk, to a forthcoming article!
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