![\"Tesla](\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/11\/tesla-assembly-line2.jpg\")
<\/a>Tesla\u2019s business model is to design, develop and manufacture high-performance electric vehicles. \u00a0Tesla\u2019s core capabilities that allow it to deliver on this business model are its powertrain intellectual property and its significant in-house design & engineering team.<\/p>\n
Tesla\u2019s core intellectual property is contained within its electric powertrain and its ability to design a vehicle which capitalizes on the uniqueness of an electric powertrain. Tesla\u2019s in-house design & engineering team redesigned the industry-standard chassis and heating & cooling systems as well as built low voltage electrical systems that significantly reduced the load on the vehicle battery pack, thereby maximizing the mileage range of the vehicle. Tesla specifically hired team members with competencies in computer aided design and crash test simulations, which significantly reduced the product development time of new models, and in light-weight materials, a very important characteristic to maximize mileage range in electric vehicles.<\/p>\n
Operating Model<\/u><\/strong><\/p>\n Tesla\u2019s business model is supported by its operating model that transforms the firm\u2019s assets (labor, intellectual property, capitalized assets, and final products) into valuable products through its sales and distribution network, low inventory maintenance system, and a widespread network of supercharger stations that are free for use by Tesla customers.<\/p>\n Tesla markets and sells its cars directly to consumers through an international network of company- owned stores and galleries. This enables Tesla to offer a premium customer experience while achieving operating efficiencies and capturing sales and service revenues that traditional auto manufacturers do not enjoy in the traditional franchised auto dealership model.<\/p>\n Tesla carries a limited inventory of vehicles at its stores and galleries and Tesla customers typically customize their vehicle when they place their order. Once the customer has selected the vehicle specifications and entered into a purchase agreement, Tesla requires a $2,500 payment to begin production, which is used to fund working capital and plan factory production.<\/p>\n Finally, to remove a barrier to the broader adoption of electric vehicles, Tesla has installed a vast network of superchargers throughout North America, Europe and Asia for the fast charging of Tesla vehicles for use by Tesla customers.<\/p>\n Tesla\u2019s superior business model would not be sufficient without the complementary operating model that markets, sells and supports the vehicle once in the hand of its customers. Similarly, the operating model would be useless without the superior product developed through Tesla\u2019s core business model of designing and manufacturing premium electric vehicles.<\/p>\n Specific features of the operating model that create and sustain a competitive advantage are Tesla\u2019s network of sales and service centers and Tesla\u2019s network of supercharger stations.\u00a0 Given the entrenched franchised dealership model prevalent with all of Tesla\u2019s competitors, it would be difficult for them to replicate the company-controlled superior customer service levels and low inventory levels achieved by Tesla. Similarly, a significant capital outlay would be required for competitors to develop a supercharger network that could rival Tesla\u2019s 380 (and growing) supercharger centers along the country\u2019s well-traveled highways.<\/p>\n Tesla\u2019s business model has also been able to leverage Tesla\u2019s operating model for its benefit. Tesla\u2019s preordering and prepayment system helps Tesla fund the working capital requirements of the business and better align its production with demand for maximum utilization and efficiency.<\/p>\n<\/a><\/a>