Tesla: Selling eco cred

Even with some bad press, the brand is on fire without much traditional advertising

Even with some bad press, the brand is on fire without much traditional advertising

It’s a typical Saturday at Yorkdale Shopping Centre in north Toronto and a hodgepodge of nearly 50 people—from yuppie couples and gangs of college guys to silver-haired parents with kids in tow—are milling about inside the Tesla showroom, roughly the size of the Lululemon nearby. There’s not much to browse.

Besides the wall-mounted touchscreens detailing vehicle specs and the odd array of branded accessories (including Tesla-logoed baby clothes with slogans like “0 emissions …almost”), the star attractions are just two cars: red and white versions of the Model S, an electric sedan with a $78,000 price tag.

“We don’t do any traditional marketing right now,” says Tesla spokesperson Alexis Georgeson. “Our stores are our advertising.” There’s no CMO, and it doesn’t work with an outside ad agency. The company spent about $9 million in advertising, promotion and related marketing expenses in 2013, according to its last annual report. And yet the six-year-old car company is now worth about half as much as General Motors with its stock worth six times what it was a year ago (roughly $40 in early April 2013, to just under $240 in mid-March this year). This despite a rash of high-profile stories of Tesla Model S’s catching on fire—five over five months. The fires were bad PR, yet the brand seems fireproof.

Behaving more like a tech/lifestyle brand than your average auto outfit, Tesla profits from media and blogger fawning and word-of-mouth hype. In 2013, it won multiple Car of the Year honours, and after first giving the Tesla S its highest-ever ranking last May (99 out of 100), in February Consumer Reports named it “Best Overall,” an honour it does not give every year.

Despite the strong performance of the stock in the last year, Theodore O’Neill, a technology analyst with Litchfield Hills Research, believes it is still undervalued. “Analysts who look to the traditional auto industry for help in understanding Tesla’s business and assessing its future view Tesla as a narrow niche player at best and a future bankruptcy at worst,” he says. “So long as a large portion of investors view it that way, the stock will remain undervalued.”

Tesla’s electric powertrain doesn’t explain the fascination with the company, adds Markus Giesler, associate professor of marketing at York University’s Schulich School of Business. The allure starts at the top: with Elon Musk, who has a mythic quality reminiscent of Steve Jobs. “All the positive things we associate with Silicon Valley startup mavericks—creativity, being unorthodox, emphasizing fun—are embodied by Musk,” says Giesler. “And that’s an Apple-oriented strategy: the brand is the person, and the person is the brand.”

To court positive press, Twitter-savvy Musk is planning to take his seven-member family on a cross-country road trip in a Model S, a six-day journey requiring only nine hours of charging. The goal was to promote Tesla’s new network of free Supercharger stations in place from NYC to L.A. No doubt, Musk is also eager to counter the fallout from a February 2013 road test by a New York Times reporter, whose car kept prematurely running out of juice.

In Giesler’s view, Tesla doesn’t market cars, but rather “a specific model of masculinity.” Traditionally, most vehicles are positioned as “breadwinner cars” (boring but sensible for family life) or “rebel cars” (Porsches and the like), he adds. But the Tesla fits into that rare, in-between sweet spot—what Giesler calls the “man-of-action hero car”—which appeals to both parents and people going through a midlife crisis. As Musk once put it, he sells “a product with high sexual appeal that in a sense helps save the world.”

Tesla’s eco cred is invisible; you don’t see the car and picture ascetic granola hippies. It looks expensive, stylish, high-tech—the kind of ride preferred by stars like Leonardo DiCaprio, George Clooney and Matt Damon. And in a canny move, those celebrities were among the first VIP buyers to get their hands on the Tesla Roadster when the all-electric sports car launched in 2008.
But despite all the buzz, Tesla remains a niche player. It’s delivered less than 25,000 electric vehicles globally to date (with a target of 35,000 for 2014). An unconventional marketing strategy might work when you don’t need to sell many cars, but is it doomed to fail when the company tries to go mass? We’ll see the prototype for a Model E—priced at half the cost of the Model S—in 2015.

It’s a challenge the company recognizes: “To further promote our brand, we may be required to change our marketing practices, which could result in substantially increased advertising expenses, including the need to use traditional media such as television, radio and print,” reads a recent investor report.

For now, though, “the time has not come to change the strategy,” says Giesler. “They’re in the phase of establishing the symbolic groundwork.” Much as Apple’s first five to 10 years solidified a maverick identity that enthusiasts still connect with, Tesla is setting up a meaningful image in the collective mind. It’s an investment in the brand’s long-term value—and that will be the key to unlocking big future paydays.

This story originally appeared in the April 2014 issue of Marketing. Subscribe now, or if you want a single issue, try us on your iPad.

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