Tesla does not advertise. He does not factor in a percentage of the price of his car for any advertising. And it spends nearly three times what other automakers do on research and development. Both of these factors are important when buyers are looking for new cars. And most importantly, if you don’t like the idea of paying for that ad.
How much is Tesla investing in technology?
Tesla invests nearly three times as much in R&D per car as the average $1,000 spent by other automakers. Tesla’s philosophy is that by being at the cutting edge of technology for its cars, it appeals more to its customers. And keeping them happy keeps Tesla moving forward.
This technology integration is something that most of its customers pay attention to. As vehicles become more homogenized, style and technology are the only things that differentiate them from each other. The bonus for Tesla comes with its contribution to environmentalism.
Is Tesla just a big tech company that makes cars?
One of the reasons investors have flocked to Tesla is that it doesn’t see itself as an automotive company. It considers itself a technology company. It’s something some can’t understand, which is OK for Tesla.
It manufactures the best-selling plug-in passenger cars in the world. This comes from a company that is barely 10 years old. No new automaker launched after World War II survived in the United States. The closest was Kaiser, who started in 1946 and died 10 years later.
Tesla also asks the question, “Do automakers really need to advertise?” On average, automakers spend nearly $500 per car on advertising. Forums and testimonials seem to work very well for Tesla. Should all automakers consider this approach instead?
Does Tesla need to advertise?
What’s different about Tesla is that its advertising and marketing department is CEO Elon Musk. Quirky, quirky and outspoken, he seems to be dominating news cycles with a single tweet. Honestly, that must be driving other automakers crazy.
So, what do these advertising figures correspond to? For GM, it spent $2.22 billion in 2020. And that number was down from 2019, when it spent $3 billion. Toyota spent nearly $1.4 billion in 2020 in the United States alone. But globally, it spent nearly $28 billion in 2021.
Spending more on regional advertising could still be a good thing
Still, according to Wards Auto, dealerships that spent money on regional advertising increased their market share over those that didn’t. According to PureCars, dealerships that spent between 50 and 90 percent saw their sales drop 28 percent in 2021.
So for some, there are still reasons to cling to advertising to boost sales. However, many dealerships have now given up on advertising with inventory so low and internet sales on the rise. But many dealers believe advertising geared more toward buybacks and service, rather than eliminating it due to low inventory, has kept the lights on.
The stock market, while not the best indicator of 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 integration into different parts of the world gives it more reach, presence and access to materials. And despite traditional automakers investing heavily in competing products, it also appears to be stable.
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