Automotive manufacturing is huge business producing around 80 million vehicles in 2007. This market has been dominated for the past 20 years by a number of firms that you can count on a single hand. Between them, the top 5 manufactures produce over 33 million vehicles accounting for over 40% of the total market. These companies are backed up by extensive investment and branding divisions that ensure the vehicles they produce are innovative and of high quality whilst consumers are saturated with the brand identity. This leads to a hostile environment for any wouldbe market entrant. Not only must they face a huge level of startup capital required to get an even modest vehicle manufacturing operation online but also the history, prestige and financial capability of the established firms.
With governments around the world deciding to take action on carbon emissions from personal vehicles by introducing strict emissions targets, a gap has been created in the market. Entrepreneurs have been continually commended for their ability to spot market openings and be quick out of the blocks to get their new products to market. It appears that this trend will be continued in the automotive industry as new firms lineup to get their piece of the electric vehicle pie. A window of opportunity exists for start-ups to establish themselves in the new technological market for electric vehicles which is predicted to grow rapidly in sales volume over the next 20 years. However, this window is quickly closing as the big manufacturers start to flex their muscles and turn their attention to the emerging market.
For any firm thinking about investing in electric vehicle production time is of the essence if they are to be successful in beating the big manufacturers to market and reap the rewards of being the first mover. In this sense, Tesla Motors has a distinct advantage over all other competitors with its sporty Roadster electric vehicle. A company founded in 2003 and based in Silicon Valley has transformed the way we think about electric vehicles with their premier model. The Roadster has a 0-60 time of under 4 seconds with a top speed of 125 mph and a combined range on 277 miles on a full charge. These performance attributes have altered the way we think about electric vehicles which are often perceived as slow, difficult to recharge and have limited ranges. The price tag is a hefty £80 000 but this can been seen as a wise investment for consumers looking for substantially cheaper running costs, sports car performance and also environmental credibility. This has attracted the attention of investors operating in the market who have pumped hundreds of millions of dollars of funds into the company along with a hefty $465 million loan package from the US government.
The corporate strategy behind Tesla Motors seems devilishly simple in its potential effectiveness. The company has attracted a great deal of attention from its Roadster model and has expanded its brand identity and name recognition with vehicle consumers. The company is now planning to unveil its new S-model which will be an electric sedan aimed at the middle class family market and is proposed to cost around the $50 000 price level. An old strategy employed by GM was “Get them into the dealerships with a coupe and then sell them a station wagon”, this seems remarkably similar to the approach favoured by Tesla. They will be hoping that the publicity they have generated from their Roadster model will turn into strong sales performance of their new S-model.
The amassing might of the automotive giants are already beginning to gear up investment into low emissions vehicle technologies. They can see just as well as we can that the emerging market for these vehicles is looking like a significant growth area for the future. Tesla, along with all of the other electric vehicle start-ups, will have a tough time ahead if they are to be successful and stave off the onslaught of the big producers. This investment boom in the emerging technology could easily turn into another dotcom bust if either the delicate policy/public opinion balance is disturbed or the large firms blow them out of the water. Tesla’s innovative strategy may play a crucial role in its future prospects but whether or not it will be enough only time will tell.
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