Tesla in Automotive industry Strategy project Essay Example for Free

Tesla in Automotive application Strategy project Essay1. Introduction The Encyclopaedia Brittanica defined the self-propelling intentness as all the companies and activities involved in the manufacturing of motor fomites, including most components, such as bodies and engines but excluding tires, batteries and fuel1. The self-propelling indus puree started with the output signal of what is widely considered to be the off clip ever travel, the Benz Patent-Motorwagen in 1886. Although the number 1 elevator gondola was earlier manufactured in Germ any(prenominal), in the many decades to come, the United States led the population in total automobile production until the start of the 21st century, when China took the top military strength. Today, China set ab pops nearly 20 billion units per year, closely double the amount of the United States. It is one of the worlds most important do master(prenominal)s when measured by revenue and it is a business that is still g rowing signifi shagtly. Last year for example, all over 87 million automobiles were produced worldwide, a 3. 6% subjoin compargond to the year before and a 43. 82% increase comp bed to 20032. Needless to say, the self-propelled diligence is big business and it is in truth probable there are business opportunities that are besides to be exploited. Tesla Motors is an Ameri put up machine shaper that tried to exploit such a business opportunity.Its an American companionship that designs and manufactures galvanising vehicles and galvanic simple machine components3. Founded in 2003, Teslas goal was to lessen the worlds dependence on petroleum- foundingd transportation and drive down the salute of voltaic vehicles. more than thanover, Teslas direct is to prove that galvanizing vehicles can be awesome as well4. This king not sound specially unique, but Tesla Motors does pay back a very distinct strategy in the sense that it wants to enter the automotive trade by firs t focusing on naughty-end sumptuousness simple machines and sports cars.Later, when Teslas products and consumers acceptance have matured, they would motion into the securities industry for the middle-class consumer, which is abundantr but also significantly more free-enterprise(a)5. The idea is to puddle a strong brand name at first, which pass on aid the company in a later stage when the decision is make to start producing lower-priced automobiles. Teslas first 1 http// worldwide. britannica. com/EBchecked/topic/45050/automotive-industry 2 http//www. oic a. elucidate/category/production-statistics/ 3 http//www. te slamotors. com/ 4 http//www. teslamotors. com/about 5 http//www. greenc arreports. com/news/1022275_msnbc-calls-ev-drivers-lunatic-fringe 3 model, the Roadster, had a base price of approximately $100. 0006.Their piece car, pretence S, is priced at $63. 750 including a $7. 500 value credit. The company straighta panache has plans to launch a $30,000 small SU V the Tesla posture X 7. even outtually, Tesla wants to turn a mass producer of electric automobile car vehicles and service some(prenominal) upper- and middle-class customers8 This discussion aims to analyze Teslas strategy. It is clear that Tesla has a very identify strategy and we will want to determine whether or not Tesla is likely to succeed in achieving its goals and become a successful enterprise.Firstly, we will give birth closer look at the environmental automotive industry using ostiariuss theory. Secondly, we need to closely look at Teslas strategy. How will Tesla try to win a respectable share of the market? As mentioned before, Tesla is a very young company and it will inevitably face fierce competition from incumbent unshakables. A clear plan to establish a foothold in such a market will be all-important(a) for the hards survival. The adjoining step is to see if Tesla identified all relevant components and industry forces, and if it has defined a strategy that takes all of these elements into account.It will surely need to attain a unique strategy if it wants to stake itself in a key position in the market. What is it exactly that differentiates Tesla from new(prenominal) car manufacturers and in what way could this be beneficial for the satisfying? Does their strategy have a steep chance of success? How can Tesla create a dismiss incomework of electric chargers? Before evaluating Teslas strategy, we must(prenominal) first clearly take a closer look at the company Tesla Motors itself and define the market in which the company is active. Even though they are currently operating in a smaller niche market (mid to high-end luxury cars), the plan is to eventually address the middle-class consumer and enter the standard automobile market.This will inevitably dumbfound our discussion but it is essential for determining the chance of success. The study includes a discussion on the high introduction barriers that are typically asso ciated in the automotive industry and the possible presence of strategical entry barriers raised by incumbent firms to reduce the likelihood of new entrants. We will also mention any another(prenominal) strategies adopted by firms in the automotive industry who want to improve their competitive position. Furthermore, the bound to which the industry is concentrated will be discussed, as well as the possible presence of strategic complements and substitutes.Moreover, Tesla will also need to take the non-market environment into consideration. Typical for the automotive sector is that it is an industry with very strict safety regulations. Tesla of course will also 6 http//jalopnik. com/5135290/tesla-increases-prices-on-already-ordered-roadsters 7 http//onpoint. wbur. org/2009/09/25/teslas-elon-musk-on-a-sub-30000-electric-car 8 http//www. marketwatch. com/ study/strategic-corporate-profile-of-tesla-motors-global-operations-2014-01-13 4 have to face the challenge of producing vehicle s that respect these requirements.On top of that, the relatively late stripping of global warming, partially ca dropd by car emanation (CO2), has led to the implementation of a series of emission standards that aim to reduce the greenhouse gasses emitted by petroleum-powered vehicles. This may not seem relevant for Tesla Motors at first since its goal is to produce electric vehicles. These regulations are however accompanied with a credit system, which means that car manufacturers that do not meet the standard are penalized and have to buy credits from other manufacturers that have a surplus of credits9.Since Tesla Motors only produces emissions-free vehicles, it has a major surplus of credits which it can sell to other car manufacturers. General Motors for example has to buy additional credits from Tesla in order to respect the regulation. This implies large transfers of wealth across car manufacturers. As a result, companies selling cars with a (too) high emission must raise pr ices to pay for the credits. On the other hand, the beneficiaries of these wealth transfers such as Tesla can now use the extra revenue to lower prices and take on a more competitive position in the market.All of this will of course be discussed more tho roughly in our discussion below. The paper concludes with a summary of the discussion and our prognosis regarding the future success of Tesla Motors in the automotive industry. 2. Market definition This paper only looks at models open in the US because its the largest electric car market, the EU is the second largest market but is much more complex because EU-countries have different legislation for electric cars. close to countries have large subsidies for electric cars and thus large market shares such as Norway, on the other hand some countries have almost no market share. The baffle S is the only available model at the moment targeting the middle to high-end luxury car market. This model costs between 63. 750$(base model, 7500 $ tax credit) and 125. 220 $( honest option, 7500$ tax credit). 10 Because the model S is all electric, we can compare the car to slighter cheaper models because of lower recollective term ownership cost thanks to lower cost for electricity compared to fuel.The base model is a full-size 5 adult seat sedan powered by a fully electric 60 kW-h motor achieving 302hp. Top speed is relatively low at around 200km/h but acceleration is very good at 5. 9 seconds to 100 km/h, this is typical for an electric engine. More pricey models ecstasy better range and performance and a warranty with un trammel kilometers on the outpouring for 8 years compared to 200. 000km for 8 years on the base model. 9 http//mitsloanexperts. mit. edu/californias-auto-emissions-policy-hits-a-tesla-pothole/ 10 Teslamotors. com 5 We will consider the mid to high-end luxury market containing one electric the Tesla, a couple of hybrids and a administer of traditional cars.Mid-end starts at prices of approximately 50 . 000 $ with cars such as the BMW 5-serie, Audi A6 and Mercedes E-class. 11 High end stops at prices above 130. 000$. For the following analyses we will sometimes look at broader markets containing cheaper secondarys because even though these cars arent substitutes they are still relevant. Research show that tesla owners were most likely to previously own a Toyota prius hybrid or secondly luxury BMW and Mercedes.12 3. Industry drawing card and valueability In this section the overall appealiveness of the environmental automotive industry is assessed using porters influential five forces model. The term environmental indicates those vehicles that do not solely rely on the combustion of fossil fuels to power their engine. Examples are electric vehicles, hybrid vehicles or plug-in hybrid electric vehicles (PHEVs). both(prenominal) the pure electric automotive industry as well as the overarching environmental automotive industry is presented, as these cannot always be seen separat ely. In his model, Michael Porter identifies five key competitive forces that determine the structure and profitability of a certain industry.The five forces are the talk terms power of providers, the negotiate power of buyers, the affright of substitutes, the threat of entry and the rivalry among existing competitors. Porters model enables managers, in an easy and straightforward way, to understand their industry environment and to shape their firms strategy accordingly. As a rule of thumb, the stronger the five forces, the lower the industrys profit potential and hence the industrys attractiveness to competitors. The most influential forces that have shaped and shroud to shape the environmental automotive industry are discussed in the following paragraphs.A first simpleness on the overall profitability of a firm is the bargain power of its suppliers. For the environmental automotive industry the bargaining power varies among the suppliers of different components. An importan t component in the construction of hybrid and electric vehicles is the assault and shelling. The bargaining power of the battery companies is low as there are a lot of manufacturers present on the market. Tesla Motors, for instance, buys Li-ion cells from different manufacturers. Consequently, in the case any problems occur with a particular battery supplier, Tesla can soft switch or threaten to switch to other suppliers at low costs.Among others, Tesla works together with Daimler AG and Panasonic to develop battery packs and chargers (Boyke, Cheng, Clevers, Schroeder, Strupp, 2010). Another important component of any vehicle is the chassis. For the construction of the chassis 11 http//buyersguide. caranddriver. com 12 h%p//www. wired. com/2014/03/tesla-model-s-toyota-prius/ 6 specialized engineering skills are required. These skills can often be obtained through with(predicate) and through strategic partnerships with other car manufacturing companies.In the case of such strateg ic interdependence the bargaining power of the suppliers is higher than in the take-it-or-leave-it battery case. In the gone Tesla had an exclusive partnership with Lotus for the sensual construction of the Roadster13. As of recently Tesla and Toyota Motor Corporation also agreed to cooperate on the organic evolution of electric vehicles, parts, the production system and engineering support14. In conclusion, however, the overall bargaining power of suppliers in the automotive industry is low. The supplier firms must contend with substitute products for sale to the industry.Tesla has more than 150 suppliers around the world, which brook over 2000 parts to Tesla. For the production of the mystify S, Tesla uses a exceedingly integrated manufacturing approach, even negotiating with suppliers to manufacture products on site to use the excess capacity. In this way, the integrated approach enables Tesla to alleviate its dependence on supplier performance (Boyke, Cheng, Clevers, Schro eder, Strupp, 2010). A second force that determines the profitability in an industry is the bargaining power of buyers. The bargaining power of buyers concerns the pressure buyers can put on the margins of producers by demanding a lower price or a higher product quality.In the environmental automotive industry the bargaining power of buyers is quite low. For Tesla in particular this is even more so. For starters, Tesla does not sell products in bulk. This means that for the consumers that purchase the blameless products no real scale put togethers are present. Moreover, Tesla has a quite unique position on the market. Tesla is the only manufacturer on the US market that produces high-end, full electric cars that can drive autonomously for over 400 km. By employing a highly skilled, technocratic labour force and management team, Tesla has branded itself as a cutting-edge, innovative firm.They manufacture high quality electric vehicles that are very performing while world environ mental-friendly and fun at the same time. The buyers of the Model S also have the possibility to entirely produce the vehicle to their taste. This creates a sense of exclusivity among the clients. Besides the B2C applications Tesla has also established a strong position in the B2B environment 15. Tesla for example licenses its patented processes and technologies to other companies.Especially in the area of battery technology 13 http//www. teslamotors. com/blog/lotus-position 14 http//www.teslamotors. com/about/press/releases/tesla-motors-and-toyota-motor-corporation- intend-work-jointly-ev-development-tm 15 http//www. slideshare. net/joseangeldf/darden-school-of-business-tesla-strategic-analysis 7 and the construction of supercharging stations Tesla has a lot of expertise16. The proper licensing of these assets will benefit the entire environmental automotive industry as a whole. An especially important force in the electric automotive industry is the threat of substitutes from out side the presumption industry.Hybrid vehicles and more specifically PHEV provide a similar functionality as the full electric vehicles. Those manufacturers inside these strongly related industries, which produce vehicles and services with an attractive price and performance, pose a serious threat to the established electric car manufacturers. For the Model S the most important substitutes are those mid to high-end hybrids. These vehicles raise low emissions and a good fuel economy at a similar price as the Model S. The most successful alternatives at heart the US automotive industry are discussed in the next chapter. In the specific price range of the Model S the threat of substitutes is stilllimited as Tesla is gradually positioning itself as a high-value, exclusive and environmental brand with a growing quash of enthusiasts17. Nonetheless, a possible future expansion into the mid-end and low- end market segment will significantly increase the threat of substitutes. There are, however, some complementing factors that might reduce the threat of substitutes both for Tesla as well as the electric automotive industry in a whole.The scope for future development in battery technology, the presence of several tax and parking incentives for electric vehicles and the pass judgment rise in oil prices in comparison to electricity prices might spur the attractiveness of the electric automotive industry. These market dynamics both play on the level of customers as well as producers. One possible negative factor in the realisation of potential gross revenue is the low availability of charging and home charging facilities. However, Tesla Motors is addressing this issue by invest heavily in strategically located charging facilities and by expanding the power and endurance of the battery pack 18. Tesla s battery pack technology is critical to the company s positioning and competitive differentiation.The low cost of the battery pack allows Tesla to not only design cars w ith battery ranges greater than the competition but also place equal emphasis on design, performance, and energy cleverness. On the short term, the threat of new entrants in the electric US market is quite a limited because of several entry barriers. The industry is characterised by high capital requirements and high sunk costs. 16 http//www. sl ate. com/articles/technolog y/technolog y/2013/05/tesla_model_s_the_electric_car_compa ny_is_a_little_bit_apple_a_little_bit. html 17 http//www. wikiwealth. com/five-forcestesla-motors, http//www. teslamotors.com/blog-and-press- releases.18 http//www. slideshare. net/joseangeldf/darden-school-of-business-tesla-strategic-analysis, http//www. reuters. com/article/2014/02/26/us-tesla-battery-panasonic-idUSBREA1O1MF20140226, http//www. t eslamotors. com/supercharger 8 Moreover, advanced, often patented, technologies and processes as well as a highly skilled workforce are required to successfully manufacture an electric car. The success of a fi rm in the industry is also largely determined by its brand image and the realisation of economies of scale19. Therefore, it is not easy for a potential new entrant to establish a foothold.This is even enhanced by the fact that the incumbent firms have a large and flexible production capacity that can be used as a retaliation device in case of entry (Boyke, Cheng, Clevers, Schroeder, Strupp, 2010). However, established vehicle manufacturers with deep pockets that have currently missed the environmental train or disruptive innovators like Tesla Motors might overcome these entry barriers in the long run. The current competition in the US environmental automotive industry is moderate. Only a few major brands are competing.Because of the high entry barriers and the threat of substitutes not a lot of brands risk burning cash in an innovative and insecure business. However, as the sector matures and more people consider switching to an electric car this will change. In a recent report of the Electric Vehicles Initiative (EVI) a global goal of 20 million electric passenger cars, including plug-in hybrid vehicles, battery electric vehicles (BEVs) and fuel cell electric vehicles, in stock by 2020 is set forward. This is still a long way to go as the total worldwide electric vehicle stock at the end of 2012 only amounted to a large 180. 000 units. In 2012, 38. 585 PHEVs and 14.592 BEVs were sold in the US. The additive stock in the US in 2012 was 71. 174 units (Clean Energy Ministerial, Electric Vehicles Initiative, International Energy Agency, 2013). In 2013 roughly 96. 000 electric vehicles were sold in the US environmental automotive industry(including hybrids)20. The three top selling brands are the Chevrolet five, the Nissan Leaf and the Tesla Model S. It is clear that the popularity of electric vehicles has significantly increased over the last few years. It is expected that this trend will only continue in the future as the number of models on the market incre ases.The share of electric cars is still only about 3,5% of the total number of cars that are sold p.a. in the US market21. Hence, the growth potential of the environmental automotive industry is huge, this both on a domestic as well as an international level. In conclusion of this section an assessment is made of the overall profitability of the environmental automotive industry. As previously argued, the bargaining power of suppliers and buyers is rather limited in the industry. Therefore, the vehicle manufacturers can attract more profits than their up- and downstream partners.The industry is also characterised by several entry barriers, especially on the 19 http//www. wikiwealth. com/five-forcestesla-motors 20 http//www. greencarreports. com/news/1089443_plug-in-electric-car-sales-for-2013-almost-double- last-years 21 http//electricdrive. org/index. php? ht=d/sp/i/20952/pid/20952 9 short term. The effective prevention of possible entrants reduces the pressure on prices and allow s incumbent firms to attract a significant share of the profits. The threat of substitutes is one of the most important restrictors on the profitability within the industry.Because of the similarity in functions between electric brands and hybrid brands it is important for the incumbent firms to create a arrogant consumer image towards their products. The growth potential of EVs is the most important driver of future profitability of the industry. Until now incumbent firms have undertaken a lot of RD initiatives in the area of battery and charging technologies. The sales numbers in the US market show that these enthronisations are finally starting to pay-off. In the long run, with a growing global popularity of EVs, it is to be expected that also other companies will consider entering the environmental automotive industry.4. Tesla in the market Tesla differentiates itself by producing environmental responsible cars that have all the benefits of a luxury vehicle. By evenly emphasi zing on speed, handling, design, comfort, and zero-emissions, Tesla creates a unique balance between performance, efficiency and aesthetics. Through the offering of this first fully electric luxury sedan car, Tesla attained a first mover advantage. Together with its silicon Valley culture, an approach that is innovative, competitive, and effective, Tesla achieved a truehearted brand name in the automotive market. (Mangram, 2012) Teslas battery technology is also critical to the companys competitive advantage.With its cutting-edge battery technology, combined with essential technology research, Tesla is able to design and produce electric cars with a far greater range than its competitors. Its lithium-ion base battery, for instance, is 250 kilograms lighter compared and has a range of up to 500 kilometers. Bron ? vergeleken met wat ? But even with a supercharger a full charge is approximately one hour. Moreover the company produces many of its key parts in-house, thus do it harde r for competitors to replicate.With the expansion of its own retail shops and the establishment of a network of free recharging points for its customers, Tesla keeps challenging the traditional car companies (The Economist, 2013). Teslas main strategy can be seen as a reflection of the innovative market approach Apple used for its ingenious technology. It holds that any new technology is often very expensive and wealthy customers are regularly the first to accept it. Consequently, Tesla produced its first vehicle, the Roadster, for the premium sports car consumer segment. Nowadays, with the production of the Model S Sedan, the middle to upper- middle class consumers are being targeted.Finally, by 2015 Tesla plans to produce and market an electric car available at a mass-market consumer price range (Tesla Motors, 10 2014). Although this Apple Computers business model is considered to be rather exceptional in the automobile industry it helped the company to position itself as groundb reaking, self-determining, and cool. Tesla BMW Daimler AG General Motors Toyota Revenue 2 billion 60 billion 117 billion clv billion 22 trillion Net Income -74 000 2 billion 6,4 billion 5,35 billion 962 billion gross sales Growth 387% 7,2 % 3,22 % 2,08 % 18,73 % The luxury car market is highly competitive, with several incumbent companies with loyal customers.Teslas main competitors in the luxury car segment are BMW, General Motors, Toyota and Mercedes. While the number of any competitive electric car is still low, an increase can be expected. General Motors Chevrolet Volt is one of the main competing vehicles in the market. It covers a wide target market and comes at a noteworthy lower price than Teslas Model S. Toyota remains the global leader when it comes to selling hybrids. Although Toyota has 4 electric cars (the Prius, the RAV4 EV, the FCHV fuel cell car, and the Scio IQ-EV), it strategically collaborates with Tesla to improve the electric car development.This alliance has been one of the main factors of Teslas growth as Tesla consumers can get customer service in Toyota sites (Toyota Motor Corporation, 2014). The chart compares Teslas main competitors on the basis of revenue, net income and sales growth. As we can see, its sales growth is overwhelming. given up that is a rather new company, it indicates its rapid expansion on the electric car market. However, Teslas net income remains negative. Nonetheless, the companys share is currently being traded at 20 times its earning, and as the company continues to grow these numbers are expected to rise.According to an article by Wall Street, 43 new hybrid, electric, and fuel-cell vehicles will be produced in the US market by 2015. Moreover, the market share of alternative fuel cars will increase from 3% in 2012 to almost 5% in 2014 (Wall Street, 2013). New electric vehicle entrants and existing plug-in hybrids manufactures will continue to compete with Tesla in the near future. While the traditional car manufactures are firmly entrenched, Teslas competitive advantages could develop to the securing of a significant market share in the electric car market. 5. Sustainability of the competitive advantage.This chapter analyses the degree of hurtability of Teslas competitive advantage. First the relevant trends and developments in the automotive industry are briefly reviewed. Furthermore, the 11 predominant isolating mechanisms in force given the market position of Tesla are discussed. We argue Tesla is a textbook example of a disruptive technology. To conclude, strategy recommendations hereupon are formulated. The primordial focus of our analysis happy chances in this chapter from the luxury car market to the overarching automotive industry.The sane hereof is clear-cut. On the one hand, the trend analysis for the automotive industry applies to and sufficiently covers the luxury car segment. On the other hand, Tesla continuously voices the strategy to level down through the segments. Furthermore, the majority of car manufacturers produce for multiple segments of the industry. The sustainability of Teslas competitive advantage thus strongly depends on the industry rather than the Model S market segment. 1. 1 Trends in the automotive industry The automotive industry is, may be argued, rather conservative. The market structure is little dynamic, without change in market leading firms for long.Furthermore, the industry evolved the past century merely through optimising the traditional automobile, with limited major breakthroughs. To illustrate, though fuel efficiency and exhaust of the combustion engine has greatly improved, working principles remain unchanged. The emergence of (electrical) alternatives that are sold commercially is only a recent phenomenon. We review three developments that will impact the automotive industry. First, the society-wide surge of environmentalism a fortiori impacts the automotive industry. A thickening body of government actions forces car manufacturers to produce cleaner cars.This both directly, through legislation (e.g. CO2 output limits for new cars), or indirectly by altering consumer behaviour through excises or tax incentives. Furthermore, consumers are increasingly environmentally conscious. Bottom-line, car sales undeniably grow more eco-friendly. Furthermore, the panoply of driver assisting technology that brakes automatically for obstacles or parks the car will be raise developed. Self-driving cars may be short-term everyday reality, with Google pulling the cart. Lastly, Gen Y is argued to focus on services rather than ownership.The emergence and success of car sharing by Zipcar or Cambio illustrates this shift in mentality for the automotive industry. 1. 2 The isolating mechanisms The electric car is strongly based on the century old inventions of Serbian engineer Nikola Tesla. We nevertheless argue that the electric car is a text book disruptive technology. This technology, spearheaded by Tesla, will herewith potentially overturn the automotive industry, challenging the 12 incumbents. The early-mover advantage in this originative destruction may enable Tesla to sustain its competitive advantage. The disruptive technology concept is extensively reviewed in the of literature.We apply the framework to the Tesla case. First, the environmental movement and increasing fuel prices created momentum for alternatives of the traditional combustion engine. Both incumbent car manufacturers and many start-ups invested in research. The hydrogen car made the press as a promising technology, but proved little feasible. Eventually the electric car showed market-viable. Many innovators inter alia Fisker, failed. However, as statistics dictate tech start-up Tesla got ahead in the race at the expense of dominant car manufacturers.The 2400 Tesla Roadsters produced, sales manifestly unattractive toincumbents, were a great success and learning opportunity for the start-up. The Tesla Model S odd batt ery range no longer forces consumers to trade off fuel efficiency for convenience. Herewith it can shift from niche product for wealthy eco-hipsters to head on competition for the traditional luxury sedan. The Model S proves superb to its competition threefold. First, the position of the battery pack lowers the gravity centre of the car for superior handling (and creates a spacious trunk in the back and front). The electric engine also delivers ostentation torque, only allowing sporty driving.Furthermore, the Model S was granted a record safety score of 5,4 out of 5. Lastly, electric engines are maintenance free. Note that the electric car still offers greater potential for proficient progress than the more tried and tested combustion engine. The incumbent firms are wary of this potential shift to electric for the automotive industry, note the growing number of electric cars offered. However, extensively studied, the difference in investment dynamics with nimble start-ups impede s them to appropriately and successfully commit to the disruptive technology. The sunk cost and replacement effect are strong in this case.Therefore, it is Tesla that has a head start, with Daimler and Toyota asking the new kid on the tote for help. The early-mover advantage of Tesla will sustain its competitive advantage threefold. First, we consider the economies of the learning curve. The first car manufacturer to fully grasp the paradigm shift Tesla benefits hereby manifold. The design-from-scratch approach is inevitable to exploit the electric car technology to the full. The Model S is a thus a step ahead of the build-on competitors, quickly adding to Teslas experience with every unit sold.Furthermore, the superior battery packs are en route to continue to offer greater range and faster charging at a lower unit cost. Note that Tesla supplies its electric powertrain to Toyota and Daimler, moreover adding to its cumulative experience. Moreover, the strong experience gained is f urther protected from imitation through multiple patents. The literature further arguments the reputation for quality to be an important source of early-mover advantage for experience goods. Thus, the brand image of an electric car brand may be considered important, notwithstanding the ubiquitous possibilities for test drives.Tesla has a rock solid reputation 13 for quality, though much like Apple it has irrational haters22. To illustrate, the Tesla recall threat cod to 3 car fires was resolved by an overnight software update that would slightly raise the Model S when driving on the highway. The Tesla stock price had a field day23. Furthermore, the Model S production cannot keep up with sales. Herewith, Tesla doesnt spend a dollar on marketing. Thirdly, Tesla benefits from network effects to sustain its competitive advantage. Tesla heavily invests in the supercharger network, that quickly expanding adds to the convenience of driving an electric car station by station. For competito rs it is meanwhile.