Business Model Design: Lessons Learned from Tesla Motors

Electric vehicle (EV) industry is still in the introduction stage in product life cycle, and dominant design remains unclear. EV companies, both incumbent from the car industry and new comers, have long taken numerous endeavors to promote EV in the niche market by providing innovative products and business models. While most carmakers 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. We review the business model approach in the literature, then classify the innovation dimensions in the EV ecosystem. We study Tesla Motors in terms of: (i) innovation related to the vehicle, (ii) innovation related to the battery (iii) innovation concerning the recharging system, and (iv) innovation toward the EV ecosystem. Lessons for incumbent carmakers for their EV business model design: 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 considerable attention to reduce range anxiety by high performance supercharger station network and high capacity battery; 3) shows a very high level of integration of information technology into many aspects of the EV business model, such as advanced in-car services and digital distribute channel; 4) shows a new value configuration which involving in high level of vertical integration towards battery and recharging network. All these lessons of this chapter would be worth the attention of the carmakers if the disruptive choices of Tesla succeed in challenging the dominant design.