Telling Your Story: How Tesla builds brand value without spending a dime on marketing

Tesla commercialTesla Motors, which doesn’t have a marketing budget, is benefiting from a creative video spot; the automaker didn’t need to spend one dime on it. In the commercial, “Modern Spaceship,” a little boy imagines himself breaking the speed of light while driving his father’s new car, a Model S. Everdream Pictures, a production company started by recent college graduates, spent $1,500 to make the commercial. So far, Tesla hasn’t paid for it, but may collaborate in the future; Everdream met with Tesla CEO Elon Musk in January to talk about possibilities, and Tesla may hire them for a future project.

As for now, Tesla has been streaming part of the video on its Facebook, Twitter, and Instagram pages; and Musk tweeted about the video recently. Tesla Motors sold 18,650 of its Model S electric luxury sedans in 2013 after launching it in the summer of 2012. The Model S sold less units last year than what Nissan Leaf and Chevrolet Volt each experienced, but for its price range – with monthly lease payments ranging from $1,051 for the 60 kilowatt-hour (kWh) version up to $1,421 for the 85-kWh Performance model – those sales figures are quite impressive – especially for an automaker that really hasn’t been around for very long. Tesla has been promoting a less-expensive lease deal to raise consumer interest (more on that later).

Tesla’s brand value has been surprising to observe (as witnessed by its incredibly strong stock prices) given that the auto industry has historically been dominated by a small number of majors with startups going the way of failed 1940s Tucker sedan. Here’s my take on how Tesla Motors has been effectively telling its story…….

Fine product: While Tesla has been getting a ton of press and social media coverage in the past year (with the Hyperloop, Supercharger, and Model S recall fueling most of it), Tesla would have faded by now if its cars had gone the way of the DeLoreon concept car. The Tesla Roadster, built on a Lotus chassis, was impressive being the first production-scale electric vehicle after it was launched in 2008. It was the Model S that turned heads and managed to impress Toyota and Daimler enough to invest in its electric powertrain components. Driving one of them isn’t easy – you don’t get to show up at a dealership and get behind the wheel with a sales rep answering all your questions. You have to show up at a Tesla ride and drive and wait in line to drive one of them; or have a friend who lets you experience what may be the strongest torque ever in a passenger car – and the unique, double-TV-screen dashboard for navigation and apps. There’s been a lot of buzz about its upcoming Model X crossover with double-hinged doors. It’s more affordable Model E compact is scheduled to roll out in late 2016.

Removing range anxiety: Fear of having an electric vehicle’s battery poop out and being stuck on the side of a road has been the major stumbling block for selling a lot more EVs. Tesla has no plans to roll out a plug-in hybrid to alleviate that range anxiety. There are two factors that seem to be helping – one is impressive per charge range. For example, the US Environmental Protection Agency reported that the Model S Performance can go 265 miles on a single charge. Another step forward is coming through with its Supercharger stations that can recharge a Model S faster than any of the CHAdeMO or SAE Combo adapter fast chargers can deliver.

Creative financing: The Tesla Model S has a sticker price ranging from the low $70Ks to the mid-$90Ks depending on the package you choose. Even with federal and state incentives, it’s much more expensive than other EVs and you can find a lot of other quality luxury cars for a much lower price. Tesla has been working with U.S. Bank and Wells Fargo on a lease program that guarantees the residual value during its three-year contract. Tesla says it will have the top residual value of any high volume premium sedan brand – Audi, BMW, Mercedes, or Lexus. Tesla is also pitching the novel idea that the cost goes down to about $500 per month. The argument goes along the lines that you can save $267 per month in fuel costs compared to the BMW 5-Series, and you can subtract more dollars and save more time by gaining access to carpool lanes while driving solo. So, creative marketing and creative financing are paying off.

Leaders with personality: It certainly helps to have a self-made multi-millionaire celebrity like Elon Musk captain the ship. While competitors like GM and dealer networks likely despise him, Musk probably isn’t losing any sleep over it. It also helps to have JB Straubel serve as chief technical officer and Franz Von Holzhausen as chief designer. They’re getting a lot of media attention and respect from car designers – and Straubel and Von Holzhausen tend to be eloquent and analytical about the Tesla technology.

Guerilla marketing: It is quite strange to see the Tesla brand go viral and ubiquitous in such a short period of time. It’s taken Hyundai a lot longer to reverse its negative image and to start winning accolades. Tesla is benefiting from getting strong ratings from Consumer Reports and NHTSA safety ratings (at least before the battery fires last Fall). Its tactics are paying off – with appointment-only ride and drives helping, attention-grabbing retail stores, and sales maneuvers that probably would have impressed P.T. Barnum. An example of this tactic is how good Tesla is at teasing its audience about the upcoming launch of its Supercharger, Model X, etc. Tesla is taking advantage of the digital media/marketing environment where brand value can be increased for free – if done the right way. Getting an email from Musk explaining how the automaker is dealing with the battery fire problem is a very good example of it.

Problem into opportunity:  “When written in Chinese, the word crisis is composed of two characters – one represents danger, and the other represents opportunity.”  U.S. Senator John F. Kennedy said in a 1959 speech. I chose this quote from JFK on my LeSage Consulting website because it eloquently states the challenge clean transportation is experiencing right now. For alternative fuels and vehicles, every one of them faces huge challenges to break through consumer and fleet acquisitions and building the essential charging/fueling infrastructure. Elon Musk and his team have so far been masterful at becoming well established in the ultra-capital intensive and challenging car business. It also makes for a colorful story of a company delivering cool new technology in this rapidly changing, global economy.

Why the Cadillac ELR TV commercial is a very bad idea

Cadillac ELR commercial 2Rex Parker, professor of transportation design, at Istituto Europeo di Design (IED) in Sao Paulo, Brazil, called me last week and expressed distress and frustration with Cadillac’s “Poolside” ELR TV commercial prominently featured in the Winter Olympics (and in the photo to the left). Parker, a former designer with major automakers, had a lot to say about it being misunderstood overseas, fueling more tension and misunderstanding during a time when US TV commercials go global and viral through Youtube and social media. His comments speak to what I see as being the most significant trend shaping the near-term future of the auto industry – globalization. As I’ve covered and commented upon many times in Green Auto Market, automakers and suppliers are now truly multi-national conglomerates serving markets in North America, Europe, Asia, and Latin America. Chinese OEMs and suppliers are the most obvious example, as Fisker Automotive, Volvo, General Motors, BYD, Tesla Motors, and others would tell you. It’s not a good time to be bragging about the US being No. 1 in everything, nor is it accurate; and it rubs against ideals that a lot of people still have about this country – a land of equality in all things regardless of where you live.

The main issue Parker has with the Cadillac ad is that many people around the world won’t get the satirical, humorous angle – and will likely see it as an extreme symbol of stereotypical American arrogance and wealthy lifestyle perks. As you can see here, Parker doesn’t hold back on expressing his opinions on auto industry trends. Here are a few points he made on the phone last week……

  • Americans traveling abroad will usually tell you this type of TV commercial is a very bad idea. Parker was in France when this commercial hit the airwaves, and it inflamed French viewers. This type of message hurts Americans traveling abroad.
  • Parker, who is half Brazilian and half American, was in Brazil last summer when a street riot in his US hometown of Huntington Beach, Calif., got a lot of media attention (which I can attest to, being stuck on Pacific Coast Highway while attempting to drive through Huntington Beach during this unexpected debacle). Brazilians were informed about it while it was going on – which is ironic given that it was a modest riot without casualties. But the internet gave them instantaneous information – and what happens in the US is taken very seriously in Brazil and around the world.
  • The Cadillac commercial conveys “American arrogance and sets us back generations,” Parker said. The days of 1950’s US Secretary of State John Foster Dulles explaining US foreign policy are long gone, he said.
  • I would also add, having been raised by a World War II vet with plenty of lively tales that I heard while growing up, that the days of post-WWII gratitude to the US are long gone. US traditions for individual rights, personal freedom and expression, holding elections, having open markets for developing industries, technology breakthroughs, and enjoying multi-media entertainment, will continue to influence what people around the world perceive and value; but toying with images and messages of what others resent, and sometimes hate, about the US, is not a good way to sell cars or improve international relations.
  • You can certainly make the case that the US government is dominated by an autocracy of interest groups who’ve stuffed pockets with lots of campaign contributions; and that the US has serious social issues to deal with – such as the brutal impact crystal methamphetamine is having in a lot of communities. You can also talk to people who’ve lived in or visited other countries around the world that are quite unstable and struggling – they’ll explain why they live in the US and probably won’t be leaving. Those are better images to convey in a TV commercial, as you can typically see watching TV lately. If you were watching the Winter Olympics, you probably saw Chevrolet’s new campaign called “The New Us.” It shows a diverse range of families under the theme, “What it means to be a family hasn’t changed; what a family looks like, has. This is the new us.”
  • Sell the car:  The best performing and most memorable car commercials show off the car – it might be driving up a hillside at peak performance, or featuring a young couple or family traveling together and feeling good. General Motors’ Cadillac division has done a great job for about 20 years now in selling the product in its ad campaigns; the ELR has what people are impressed about with GM’s Voltec drivetrain, and with what Cadillac designers have placed into platforms and dashboard panels. The Cadillac ELR “Poolside” commercial only shows the car being charged and its dashboard control panel for a few seconds. The commercial’s agenda looks like something else besides marketing the product.

Cadillac ELR and BMW i8 Olympics TV commercials – How good were they?

Cadillace ELR being chargedWhile Super Bowl commercials are infamous for being the most expensive and most watched TV spots in the world, there might be a better media outlet for marketing new cars: the Olympics. While many of the commercials featured Olympic athletes skiing and skating by, there were two that gave a lot of time to luxury extended range electric vehicles: the 2014 Cadillac ELR and the 2015 BMW i8. And they were shown a lot more times than the single viewing you get on the Super Bowl (although the Olympics only happen every four years, or two years if you count the staggered schedule with summer and winter games). As for these Olympic TV commercials, my question would be:  How good were they for marketing the cars?

The Cadillac ELR commercial plays off the competitive edge the US takes to the Olympics, and the upscale lifestyle lived by those driving the ELR – which is in direct competition with Tesla Model S and BMW i Series. “You work hard, create your own luck, and you’ve got to believe anything is possible,” well-recognized TV and movie actor Neal McDonough says as he unplugs his Cadillac ELR and takes off for the office. Americans don’t take the month of August off, like Europeans do, for vacation. “Because we’re crazy, driven, hard-working believers, that’s why.” Those other countries might think Americans are nuts, but we’ve had the Wright Brothers, Bill Gates, Les Paul, and Muhammad Ali – and we landed on the moon first, he says.

While it’s watchable and humorous, it spends very little time onscreen with the plug-in coupe, which is a very lush and impressive car to experience visually and hands on; one would think the car should make up most of the commercial’s focus and not just a few seconds at the end. Yet the commercial is more about style and social commentary than marketing the Cadillac ELR. The production schedule for the ELR is limited and there were only 41 units sold in the US in January; but that’s more than the BMW i Series sold in the US – it’s still very early for the BMW i3 and i8.

I think the BMW commercial gets a little bit closer to hitting the mark. The “Hello Future” ad features a voice over from Arthur C. Clarke’s 1964 BBC presentation. The famous science fiction novelist (with 2001: A Space Odyssey among his books) says, “The only thing we can be sure of about the future is that it will be absolutely fantastic. So, if what I say now seems to you to be very reasonable, then I will have failed completely. Only if what I tell you appears absolutely unbelievable have we any chance of visualizing the future as it really will happen.”

Near the end of the commercial, the BMW i8 appears in the dark and then takes shape, with its raising “butterfly doors” (reminiscent of the upcoming Tesla Model X and its raising “falcon doors”). This car will sell for $136,000 and is supposed to have the same performance as a BMW 335i. So, the audience will be very limited, too. Leasing will be necessary – the price will come down but it’s still very steep. The Cadillac ELR starts at about $75,000 and is more competitive with the Tesla Model S, but it’s also limited in its audience size.

For automakers to turn profits on EVs, it has to be worth the investment and reach a level of scale that makes it competitive with some of their ICE models. These niched luxury extended range cars aren’t going in that direction; they do raise consumer interest in the new alternative powertrain, but they’re too pricy to assist in widespread adoption of EVs. They get federal tax and state incentives, but the price is still very high – even with good lease packages. There’s some public opinion out there that EVs are just a toy for a very small percentage of wealthy Americans, which can get in the way of mainstream acceptance.