Tesla doesn’t advertise. It doesn’t factor a percentage of its car’s price for any advertising. And it spends almost three times what the other automakers do on research and development. Both of these are important considerations when buyers look for new cars. And especially, if you don’t like the idea of paying for that advertising.
How much does Tesla invest in technology?
Tesla invests almost three times as much into R&D per car than the average $1,000 spent by other carmakers. Tesla’s philosophy is that by being at the forefront of technology for its cars, this appeals to its customers more. And keeping them happy keeps Tesla moving forward.
That technology integration is something most of its customers are paying attention to. As vehicles become more homogenized, styling and technology are the only things differentiating one from the other. The bonus for Tesla comes with its contribution to environmentalism.
Is Tesla just a big technology company making cars?
One reason investors have flocked to Tesla is that it doesn’t consider itself a car company. It sees itself as a technology company. That’s something that some can’t wrap their arms around, which is OK for Tesla.
It makes the best-selling plug-in passenger cars in the world. This is from a company barely 10 years old. No new automaker started after WWII has survived in the US. The closest was Kaiser, which started in 1946 and died 10 years later.
Tesla also begs the question, “Do carmakers really need to advertise?” On average, carmakers spend almost $500 per car to advertise. Forums and testimonials seem to work very well for Tesla. Should all car manufacturers consider this approach instead?
Does Tesla need to advertise at all?
What’s different about Tesla is that its advertising and marketing department is CEO Elon Musk. Quirky, eccentric, and outspoken, he seems to dominate news cycles with a single tweet. Honestly, it must be driving other carmakers crazy.
So what do these advertising numbers translate to? For GM, it spent $2.22 billion in 2020. And that figure was down from 2019 when it spent $3 billion. Toyota spent almost $1.4 billion in 2020 in the US alone. But globally, it spent almost $28 billion in 2021.
Spending more on regional advertising might still be good
Yet, according to Wards Auto, dealers who spent money on regional advertising grew their market share compared to those who didn’t. According to PureCars, dealers that spent between 50 percent to 90 percent saw sales drop 28 percent in 2021.
So for some, there are still reasons to cling to advertising to boost sales. However, now many dealers have pulled back on advertising with inventories so low and internet sales ramping up. But many dealers feel that slanting advertising more toward buy-backs and service, rather than eliminating it because of low inventories, has kept the lights on.
The stock market, though not the best gauge for company philosophy, seems to agree with how Tesla operates. This week it was valued at $1 trillion. And with the Tesla Gigafactory opening this week in Berlin, its slow incorporation into different parts of the world, gives it more reach, presence, and access to materials. And in spite of legacy automakers investing heavily in rivaling products, it also appears to be stable.