Business Model Design: Lessons Learned from Tesla Motors

Publication Type:

Conference Paper


Gerpisa colloquium, Paris (2015)


Business Model, Electric Vehicle, innovation management, Tesla Motors


The increasing emergence of electric vehicle (EV) has benefit from high oil prices, carbon constraints, and rise of organized car sharing (Dijk, Orsato, & Kemp, 2013), and has draw attention from both car manufactories and society. However, commercialization has been ineffective thus far, and dominant design is still dormant mainly because of high initial investment and range anxiety (Dijk et al., 2013). Accordingly, EV industry is still in the introduction stage in product life cycle, and struggling to take advantage of economies of scale in small niche markets. EV enterprises, including incumbent and entrepreneurial OEMs, have long taken numerous endeavors to promote EV in the niche markets by providing innovative business models. Although numerous literature has been carried out towards demonstrations or regional projects (Weiller & Neely, 2013; Weiller, Shang, Neely, & Shi, 2013), limited amount of literature can guide OEMs to entry national or international market.
While most OEMs still take ‘business as usual’ approach for developing their EV production and offers, Tesla Motors, an EV entrepreneurial firm, stands out by providing disruptive innovation solutions (Markides, 2006). Tesla Motors has been viewed as a black horse to the EV market, and it obtains a success as an OEM dedicated for EV. Consequently, in this paper, authors are concerned providing EV business model design recommendations for OEMs, deducing from a holistic and historical case study approach (Kley, Lerch, & Dallinger, 2011) of Tesla Motors.
The paper will study the business model of Tesla Motors along its timeline, taking into account the three dimensions of Kley and al. (2011). We will study accordingly: (i) innovation related to vehicle together with the battery, (ii) innovation concerning the infrastructure system and (iii) innovation toward the grid services. By doing so, detailed analysis will be addressed on Tesla Motors’ value proposition, on distribution channel and on very innovative Tesla IT management.
We would like to draw several lessons for more classical OEMs in their business model design of EV: 1) Tesla Motors holds a product strategy entering from high-end market and moving to mass market, with a high level of innovation adaptation and learning by doing; 2) Tesla pays a considerable attention to high performance supercharger station and its aggressive expansion around the main intercity highways in US and Europe; 3) Tesla shows a very high level of integration of information technology into many aspects of EV business model, such as advanced in-car services (eg. autopilot) and digital distribute channel. All these lessons would worth the attention of the OEMs if the Tesla disruptive choices succeed in challenging the dominant design.

Dijk, M., Orsato, R. J., & Kemp, R. (2013). The emergence of an electric mobility trajectory. Energy Policy, 52, 135–145. doi:10.1016/j.enpol.2012.04.024
Kley, F., Lerch, C., & Dallinger, D. (2011). New business models for electric cars—A holistic approach. Energy Policy, 39(6), 3392–3403. doi:10.1016/j.enpol.2011.03.036
Markides, C. (2006). Disruptive innovation: In need of better theory. Journal of Product Innovation Management, 23, 19–25. doi:10.1111/j.1540-5885.2005.00177.x
Weiller, C., & Neely, A. (2013). Business Model Design in an Ecosystem Context. University of Cambridge, Cambridge Service Alliance.
Weiller, C., Shang, A., Neely, A., & Shi, Y. (2013). Competing and Co-existing Business Models for EV: Lessons from International Case Studies. In Electric Vehicle Symposium and Exhibition (pp. 1–12). doi:10.1109/EVS.2013.6914776

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