Tesla Model 3: Distraction or disruption?

Tesla has come a long way. Last week the company launched its lower-cost Model 3 car priced around $35,000. The preorder for the latest release makes Tesla the envy of its more traditional competitors, with current indications showing the car manufacturer has amassed over $350 million in orders for a vehicle that most consumers will not be able to park in their driveways until mid- to late-2017.

Tesla Model 3

The prominence of the number “35” in this scenario is also interesting given the context of current energy trends. In the commodities sector, analysts have been concerned about what sub-$35 prices per barrel of oil would signal for the future of the industry. Moreover, $35,000 for the Model 3 heralds a major departure from Tesla’s previous pricing strategy, which has traditionally relied heavily on a premium offering (starting at around $80,000 or above for the Tesla Model S and Tesla Roadster) since the cars began arriving in showrooms in 2007.

Until now, German car manufacturers selling medium-sized sedans have likely viewed Tesla as somewhat of a diversion, but not a major threat. The Model 3 has the potential to change all of that: What was once a distraction is fast becoming a disruption. Likewise, a battle-scarred oil sector must be looking at Tesla with some level of trepidation. While it is not yet clear whether we have reached a tipping point in oil prices, the advances in alternative energy are creating a democratization of choice that is unlike anything the consumer market has seen before.

Tesla Motors Munich Showroom

The Tesla brand is redefining the parameters of not just sustainable transportation, but also vertical integration. Indeed, one should be cautious of seeing Tesla as just another car brand. The Tesla Powerwall is a classic example of the company’s unrivaled integration across the automotive and power industries. It is a thoroughly complementary offer to the ever-growing range of Tesla vehicles, making Tesla unique among its competitors in the automobile sector. The vertically integrated approach to carbon-free motoring is also increasingly relevant to “green-leaning consumers” who are disenchanted with what has previously been on offer from the big car and oil companies.

As Tesla demonstrates, the ability of a brand to adapt to the forces of disruption is a key factor in determining a brand’s overall agility. Today’s best brands succeed due to their unbridled desire to be agile. For too long, car manufacturers and old-world energy companies have resisted unlocking a carbon-free future for motorists.

Quite simply, where others see complexity, Tesla has found opportunity.

We’re still in the early days of the Model 3, but the Tesla phenomenon shows few signs of abating. The Tesla brand has redefined the parameters of what it means to be environmentally friendly. Until now the Tesla has been aspirational for many, but not practical given the hefty price tag on its two key models. The pricing for the Model 3 means that what was once aspiration is now accessible.

It will be fascinating to observe how the car and oil industries reposition their respective offers in response to a Tesla vehicle with an entry price of $35,000.

This article was originally published by Marketing Interactive (April 2016).

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