Volume 14 No. 4: Tesla is revving up the advertising engine
In 2020, Chrysler spend $784 on R&D and $644 on advertising per car sold.
For Toyota, those numbers were $1,063 on R&D and $454 on advertising. Ford spent $1,186 and $468.
Tesla, on the other hand, spent a whopping $2,984 on R&D. And $0 on advertising.
Now, that’s changing.
Tesla shifts gears into advertising.
Each week, we break down another marketing concept so you can skip the hype and get directly to what works.
For years, Tesla has been the poster child for why not every brand needs advertising. Co-founder and CEO Elon Musk has publicly claimed to hate advertising, saying he prefers to invest in research and development. And so Tesla’s dominated the electric vehicle market through word-of-mouth marketing and Musk’s notorious Twitter presence alone. And for a while, it seemed to work. Demand exceeded supply—there was a year-long waiting list. Tesla even made an impressive $9,580 in profit per car in 2022.
But that couldn’t last forever.
The EV category is experiencing surging competition. Tesla’s ranking as the #1 EV maker in the world is no longer unchallenged. Both EV startups and established auto manufacturers are entering the space with affordably priced and luxury offerings.
Musk’s public reputation also took a hit recently, as critiques of his takeover at Twitter have portrayed him as erratic and eccentric. Musk’s association with Tesla suddenly didn’t have the glow it once did.
Earlier this year, Tesla began discounting vehicles with global price cuts up to 20%. The discounts were in response to dropping market share and missing 2022 Wall Street delivery estimates. The company worried its strategy was faltering, especially as recession rumors tightened consumers’ budgets.
A few weeks ago, Elon Musk surprised everyone in a shareholder meeting by announcing Tesla would embrace advertising. Musk said he hoped advertising would both promote Tesla’s safety features and combat “misinformation” about pricing.
It’s about time. Because advertising isn’t only about immediate customer acquisition, something Tesla only now is finding challenging. It’s about crafting the story around your brand. Creating demand for decades to come. Even building price insensitivity since brands that consumers perceive as differentiated can charge higher prices.
Clearly, not advertising only works so long. For Tesla, the advertising wheels are already in motion. Tesla Asia shared a commercial titled "Drive to Believe" on Twitter, featuring a mother of two who fell head over heels for Tesla's technology and safety features.
Key Takeaway: Marketing and advertising are hugely powerful. Leaning into them can mean driving lasting growth for your business. Avoiding them may work for a time, but in the long term can be dangerous for even the biggest companies.
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