Abstract
Tesla is one of the world’s leading electric vehicle (EV) manufacturing companies. Its market entry into China has been marred with several challenges and wins, some of which are discussed in this document. Drawing from a secondary literature review analysis, the findings of this document demonstrate that Tesla’s market entry strategy into China has been multipronged with tenets in celebrity advertisement, collaborative marketing, and hunger campaigns. This multifaceted marketing campaign has enabled Tesla to reach different consumer groups within the Chinese EV market.
Key sections of this paper further interrogate the firm’s marketing campaign in China relative to the 4Ps of marketing. The findings of this discussion equally discuss the establishment of the Tesla brand in the Chinese market, its development over the years, and the current market situation. The goal is to identify key strengths and weaknesses associated with the brand that could be useful in consolidating its market position and exploiting emerging opportunities in the EV market.
Introduction
The global electric vehicle market is growing and influencing the global automotive industry. Driven by environmental concerns, proponents of the Electric Vehicle (EV) market suggest that these sustainable automobiles are suited for the future because they rely on clean energy instead of petroleum or fossil fuels. This development in the automobile industry is part of a more significant technological revolution trend affecting most economic sectors. It is partly linked to adopting Web 4.0 technologies, machine learning, and artificial intelligence (AI) systems. A deeper analysis of this trend reveals that adopting EVs in the automotive industry is an innovative way of reducing environmental pollution caused by cars.
China, which has been grappling with pollution in some of its major cities, has encouraged EV companies to set up manufacturing plants in the country. Thus, the government, industry players, and observers have welcomed the move toward adopting EVs in the country. Tesla has been leading the trend in the adoption of this change. The Texas-based company is among the top producers of electric vehicles worldwide. From an obscure brand, Tesla has risen from the peripheries of the world’s automotive market to compete with some of the leading giants in the industry, including Ford, Mercedes, Toyota, and General Motors. Tesla’s global success has been pegged on its ability to convince the world that a future dependent on sustainable energy is possible.
This noble objective has prompted many observers to associate the Tesla brand with environmental protection and high-tech development. Based on this characterization, Tesla has maintained high brand visibility in China and around the world. At the same time, it has churned out some of the best and highest-quality products in the market. Tesla’s entry into the Chinese market occurred in 2011. The Chinese government supported its entry into the local industry to spur innovation and competitiveness.
Tesla entered the Chinese EV market, focusing exclusively on developing electric-powered engines. Its venture into the market was unique from all others that have existed in the sector since because it had developed the first lithium-ion battery to be used in an electric car. Most other car manufacturers had not developed automobiles with the same technology. The implication of this development to the global EV market was that Tesla’s cars could cover more distance on a single charge compared to most other competitors in the industry. Therefore, its advanced product development concepts and leading scientific capabilities were the first drivers of market interest for Tesla in the Chinese market.
The current study analyzes Tesla’s marketing campaign, which has led to its relative success in the Chinese market. Key sections of this report will highlight critical information relating to the firm, including its establishment, development, and current situation.
Similarly, the current probe will examine Tesla’s marketing strategy relative to the 4Ps of marketing, as presented by renowned marketing scholar Philip Kotler. His analysis will highlight the strengths and weaknesses of the company’s current marketing plan. Weaknesses will form the basis for developing solutions to improve Tesla’s marketing plan in China for improved success. A summary of the main findings will be presented in the conclusion section of the paper.
Key Information on Tesla
Establishment
Given the centrality of the Chinese market to the broader Asian EV industry, it is essential to understand the interventions that the Chinese government has introduced to help bolster Tesla’s success in China. Concisely, as highlighted in this report, Tesla received targeted government support to set up its base in China. For example, the government exempted American firms from the freight ownership requirement, demanding local representation in managing foreign businesses. This decision was adopted to help spur investments in the Chinese EV market.
Development
Tesla’s market development plan in China has been pegged on its ability to expand its product line to fit the characteristics of the Chinese market. Its development-oriented strategy has also shifted from supply-side to demand-side economics. This plan has led to a significant increase in its market share in China. Indeed, it has enabled the company to address the needs of diverse customer groups within China. Thus, its development has been pegged on pursuing demand-side instead of supply-side economics.
Current Situation
Tesla’s market share in the EV market in China and worldwide is growing. This trend has been reported despite slumps in demand occasioned by the COVID-19 pandemic. This increase has been commensurate with similar growth in the firm’s market share of battery-electric vehicles in China. Indeed, statistics reveal that this figure increased from 6% to 21% in 2020. Figure 1 below captures the increase in market share in the past three years.
As highlighted in Figure 1 above, Tesla’s presence in the Chinese electric vehicle market has increased three-fold from 2019 to 2020. Broadly, the success of the brand in China and its growing dominance in the world could be attributed to several policy and cultural events occurring in China and the world. One place where this relationship emerges is through an analysis of Tesla’s Chinese success and its alignment with government policies. This statement highlights the need to understand Tesla’s marketing strategy in China through the lens of Kotler’s 4Ps of marketing, as described below.
Analysis of Tesla’s Marketing Strategy from the 4Ps Perspective
Product
Tesla’s product strategy is based on sustainable energy production. Its cars have capabilities that promote clean energy and accelerate the use of electric power to propel vehicles. Few automobile companies in China and worldwide have achieved the same level of success in developing and marketing electric vehicles as Tesla has done. In this regard, Tesla’s product strategy has been pegged on leveraging technological capabilities to manufacture innovative vehicles for the market.
Positive customer experiences have enabled the firm to create a “halo effect,” reinforcing the belief that Tesla is a leader in automobile production. Overall, Tesla’s product development strategy has differentiated it from the market. Today, most customers believe the company’s product strategy has enabled it to make some of the industry’s highest-quality electric vehicles available. Overall, the above statistics reveal that Tesla cars are competitive and innovative in matching or surpassing regular car models’ price, performance, and utility values.
Price
Tesla’s pricing strategy is based on the premium model. This strategy means that most of the company’s cars are out of the price range of many consumers. This cost assessment model is a significant weakness of the company’s marketing strategy because it limits the number of people supporting the brand. The impact is a reduction in marketing growth potential. At the same time, Tesla’s premium pricing model is innovative because it encourages users to purchase vehicles with the surety of future financial gains. This plan has been implemented by subsidizing insurance premiums for new car buyers.
Additionally, the commitment of the Chinese government to subsidize the purchase of electric vehicles for the people of China has equally influenced Tesla’s pricing strategy. Since 2019, Tesla’s customers have experienced significant price drops by up to 100,000 Yuan due to production subsidies and tax breaks. Despite these drops, the price ranges for the firm’s products have remained relatively stable at between 25% and 27%. Broadly, Tesla’s premium pricing model has helped to prevent an outflow of customers who would have otherwise purchased alternative products because of lower insurance premiums. Therefore, the firm’s marketing strategy is long-term, in the sense that it encourages buyers to buy their products with the surety that there will be lower running costs in the long term.
Promotion
Tesla has no single promotion strategy because its marketing plan is multifaceted. This statement means that most of the vehicle’s sales numbers were driven by an organic interest in the company’s brands, including word-of-mouth communication. Tesla’s marketing strategy in China is unlike that of traditional companies. Indeed, the company uses a multipronged marketing strategy that cuts across different platforms and partnerships.
For example, the company uses a combination of individual and collaborative marketing strategies in multiple cities. This multipronged strategy has enabled the firm to appeal to different audiences within the city. It has also enabled it to develop a strong brand image within the short time it has been operational in the Chinese market.
Placement
The unique performance and design associated with Tesla’s products have tapped into its placement strategy, making it difficult for rivals to imitate the brand. Tesla’s marketing strategy has been supported by a differentiated plan of using celebrities to market the car brands, positioning the brand as a premium one. The company has also participated in hunger alleviation campaigns to draw attention to its brand in selected markets, thereby improving its social development goals.
Tesla’s placement strategy combines online and offline techniques. This plan means that the company’s customers can find the vehicles in its registered dealerships through a physical walk-in or order their desired vehicle online. Based on the findings of Tesla’s 4Ps, Table 1 below highlights the strengths and weaknesses of the firm’s marketing strategy.
Table 1. Strengths and weaknesses of Tesla’s marketing plan (Source: Developed by Author).
Suggestions
Increasing Charging Stations
China is a big market for Tesla based on its initial success in this industry. Increasing charging stations in the country is likely to increase interest in the company’s products because it will be practical for users to charge their vehicles conveniently. As the number of charging stations increases, Tesla’s visibility in the Chinese market will likely expand. Setting up more charging stations increases customers’ trust in the company’s products because they will be assured to access power when needed. Tesla’s marketability problems may be significantly minimized due to this progress.
Based on Tesla’s success in China so far, it is prudent for its managers to continue focusing on developing its competencies in research and development. At the same time, their approach to improving supply-side competencies should similarly be bolstered. Furthermore, China’s journey towards overcoming the adverse effects of the COVID-19 pandemic presents an opportunity for the firm to exploit growing marketing opportunities within the country to strengthen its position as an EV manufacturer in China and worldwide.
Cultural Alignment
Given that local brands have a better understanding of the culture of Chinese customers, Tesla needs to pay attention to the characteristics of Chinese consumers when developing future car models. It is necessary to do so as it would help to secure the company’s future profitability. In response to this proposal, Tesla’s entry into the Chinese market has been implemented via a localized business strategy framework.
This model of business entry is characterized by the adoption of local marketing characteristics with those of the host market. This marketing strategy has been mainly beneficial to the company but can potentially diminish its strength in the market. The problem may make it difficult for consumers to differentiate the American brand from local competitors, including Xiaopeng, NIO, and BYD.
Pace Setter
There are proposals to make Tesla a bellwether case in China. This means that the company would be playing the role of an industry champion and standards developer. Its R&D capabilities can be used in this setting to improve local competencies. For example, Tesla has developed improved capabilities in manufacturing new battery technologies for EVs. This innovative potential has helped to make its products affordable.
The reduction in the cost of battery production set the foundation for the entrenchment of the Tesla brand in China. Figure 2 below shows how a commensurate reduction in battery costs has led to increased demand for electric vehicles in China between 2010 and today. The trend is expected to continue until 2030 and beyond.
Tesla’s plan to decrease battery production costs aligns with part of the firm’s agreement with China that it would build an R&D development facility in the country. It should help the company instill essential EV design and assembly knowledge. This type of knowledge could help develop local brand designs. The proposal may help boost the local design of the cars sold in the state and improve their performance simultaneously.
Overall, the bellwether position of Tesla in China can be used to improve industry standards and improve supply chain management through the convergence of different points in its supply chain. Relative to this statement, observers suggest that this strategy would help to improve the strength of the country’s EV market. Therefore, Tesla has an opportunity to be a market leader and source of EV development knowledge in China’s EV industry.
Conclusion
As highlighted in this paper, Tesla has built one of China’s most recognizable automotive brands worldwide. Its market growth in China was first founded on a stable domestic market sold on the idea that the firm would offer a high-quality electric vehicle. Tesla’s product strategy is unique because it focuses exclusively on developing automobiles powered by electricity. This product development strategy is unlike those pursued by competitors in the Chinese EV industry because most are still developing internal combustion engines or hybrid ones where gasoline and electricity are both in use. Tesla’s product development strategy departs from the traditional use of fossil fuel engines; instead, it has adopted an electric-powered model, which few companies in the industry have implemented successfully.
This study’s findings have shown that Tesla’s brand image has been synonymously used to represent a decline in pollution and the promotion of environmental conservation. The Chinese government has been keen on achieving the same goal. Therefore, Tesla’s marketing strategy is consistent with the Chinese government’s policy of reducing environmental pollution.
Regarding pricing, Tesla’s entry into the Chinese market is characterized by the ability to demonstrate that the company could develop fast and reliable electric vehicles. Thus, the company’s pricing strategy is premium-based because of its focus on developing electric cars as an exclusive market segment. Therefore, the company’s promotion strategy is based on projecting the image of a high-end car automaker.
Overall, the findings of this study suggest that Tesla uses a multifaceted marketing strategy. They similarly reveal that Tesla has had a short rise to the top of the Chinese EV market because it has managed to increase its market share from an obscure position to becoming the second most successful EV company in China within a short time. Its outstanding technology, unique design, and high product quality have earned respect among peers and a strong brand following in the Chinese EV market. The findings of this study will help other EV car companies enter the Chinese market. Tesla’s experience and relative success in this industry will similarly provide a synopsis of the challenges and opportunities that new automobile companies could encounter when venturing into the same market.
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