Business Model Design: Lessons Learned from Tesla Motors

Electric vehicle (EV) industry is still in the introduction stage in product life cycle, and its dominant design is still dormant. EV manufacturing companies have long taken numerous endeavors to promote EV in the niche markets by providing innovative business models. 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 choices and solutions. The authors review the business model approach in literature, then classify the innovation dimensions in EV industry. We study on Tesla Motors accordingly: (i) innovation related to the vehicle, (ii) innovation related to the battery (iii) innovation concerning the infrastructure system and (iv) innovation toward value configuration. We extract four main lessons for classical OEMs: Tesla Motors 1) 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) pays a considerable attention to reduce range anxiety by high performance supercharger station network and high capacity battery; 3) shows a high integration of information technology into many aspects of EV business model, such as advanced in-car services, and digital distribute channel; 4) shows a new value configuration which involve a massive use of vertical integration from EVs manufacturing towards battery software, recharging network and battery manufacturing. All these lessons would worth the attention of the OEMs if the Tesla disruptive choices succeed in challenging the dominant design.