There is a good reason that Tesla is seen more as a Silicon Valley type of tech company than a typical auto manufacturer. They do things differently!
This doesn’t come over very well with many people and Elon Musk often receives lots of hate because of it. But you have to admire Musk’s and the companies’ effort at creative brand awareness and forward business thinking. It seems obvious; if you’re a company that is different and thinks toward the future, you probably have to be a company that behaves and operates in the same way.
In this article, I did some research and compiled the most obvious and best reasons Tesla doesn’t do any advertising. It might seem counterintuitive, but it’s working and they are making inroads at an astonishing pace. Check it out! If you can think of another reason, please let me know!
- 1. Word-of-Mouth Is Stronger Than Paid Advertising
- 2. Elon Musk Serves As Free Advertising
- 3. They’ve Been Successful So Far
- 4. Higher Demand Than Supply
- 5. Tesla’s Innovation Breeds Free Advertising
- 6. It’s Prohibitively Expensive To Advertise
- 7. EV Customers Don’t Need Advertising
- 8. EV Market Is Growing
- 9. More Effective Avenues To Reach Customers
- Hey! I just found another reason Tesla doesn’t do any advertising!
- Frequently Asked Questions
1. Word-of-Mouth Is Stronger Than Paid Advertising
When you talk about electric vehicles, I guarantee that Tesla is the driving force of the conversation. That’s because Tesla has a knack for getting people to talk about their brand: word-of-mouth advertising.
An obvious advantage of word-of-mouth advertising is the cost, free. However, there is an even stronger advantage than low cost. According to SEMRush, word-of-mouth results in five times more sales than traditional paid advertising, so Tesla is already utilizing a valuable form of advertising, without paying a dime!
Since Tesla has a strong presence in conversation, they don’t need to pay for advertising. If you want to read more about the importance of word-of-mouth advertising, check out Forbes’ article on why word-of-mouth advertising is the most important social media.
2. Elon Musk Serves As Free Advertising
The next reason Tesla doesn’t need to run any advertising is that its CEO drives a lot of attention toward Tesla. Elon Musk has dominated the tabloid news over the past few years, driving free attention toward Tesla.
When Elon Musk appears on podcasts like the Joe Rogan Experience and consumes cannabis or, more recently, tries to buy Twitter, he becomes the week’s topic. When Elon Musk is the topic of the week, so is Tesla.
If Tesla can garner as much attention as a $6 million Superbowl ad from Elon Musking posting a silly meme on Twitter, there’s no need to expend resources on paid advertising.
3. They’ve Been Successful So Far
Tesla has never spent anything on traditional advertising, and it doesn’t seem to affect their demand, brand recognition, or any other metric advertising is meant to further. Therefore, since Tesla has been successful so far, there’s no reason to start paying for advertising now.
Let’s check out Tesla’s annual deliveries stats to see how little a lack of advertising has affected their bottom line:
|Tesla’s Annual Delivery Stats 2012 to 2021|
The above chart displays the number of vehicles Tesla has delivered to customers every year since 2012. The chart displays a consistent growth in vehicle deliveries every year.
For context let’s compare Tesla to Ford. From 2007 to 2017 Ford’s vehicle deliveries had no significant changes. In 2007 Ford produced about 6,247,000 vehicles, compared to 6,386,000 in 2017.
If it ain’t broke, don’t fix it, and clearly, Tesla’s sales are not broken, given the company has experienced strong growth every year. Therefore, there’s no need to fix it by paying for advertising.
4. Higher Demand Than Supply
Tesla can’t produce cars at a fast enough rate to fulfill the demand for their product. Tesla’s inability to keep up with demand is probably the number one reason they don’t advertise.
Here is a quote from Elon Musk on the over-demand Tesla is facing: “Demand is exceeding production to a ridiculous degree; we’re actually probably gonna…just stop taking orders for anything beyond some period of time because some of the timing is like a year away.”
If Tesla has a supply shortage and excess demand, advertising would be a poor use of money. Currently, Tesla doesn’t need new customers and is even considering cutting off the flow of new customers.
5. Tesla’s Innovation Breeds Free Advertising
The innovative features that Tesla adds to their vehicles are a driving force in the first point of this article, word-of-mouth advertising. When Tesla incorporates features like self-driving, bioweapon defense, and even features as simple as a frunk, people talk about it, which breeds free advertising.
Word-of-mouth in daily conversation is a major part of Tesla’s free advertising from innovation, but news coverage is even more significant. When Tesla incorporates a new feature into their vehicle, major news outlets like CNN, Fox News, and Forbes run stories.
Tesla’s innovative features reach more people than the most successful traditional advertising campaign could hope to reach because the coverage from multiple major news mediums has a reach greater than money can buy.
Did you know: Finances are a major factor in why Tesla stays away from paid advertising? The cost of advertising through traditional means is prohibitively expensive.
6. It’s Prohibitively Expensive To Advertise
Thanks to Web FX, we can dive into the cost of advertising broken down by popular traditional mediums.
|The Cost of Advertising by Medium|
|TV Advertising||$63,000 to $6 million|
|Pay Per Click Marketing||$4,000 to $10,000|
|Magazine Advertising||$500 to $397,000|
Since Tesla is a large brand, we can assume their advertising costs would be on the higher end of the above spectrums.
Therefore, while competing companies like Ford are spending $6 million on a Superbowl TV ad, Tesla is forgoing the expense in favor of refining its product.
7. EV Customers Don’t Need Advertising
Electric vehicle customers have decided that gas is the way of the past. They don’t need an ad on TV to sway them toward electric vehicles because their mind is made up, so it would be a waste of resources for Tesla to try and convert the converted by paying for ads.
Additionally, the electric vehicle customer base tends to be more tech-savvy than the average car owner, and tech-savvy people don’t consume much traditional advertising.
If electric vehicle customers don’t consume much traditional advertising, Tesla won’t find any benefit from purchasing a traditional advertisement.
8. EV Market Is Growing
The electric vehicle market is growing, and Tesla is leading the charge. Even through the COVID-19 pandemic, the electric vehicle market continued to grow when several industries struggled.
Random Fun Stat:
Tesla is the leading manufacturer in the electric vehicle market, owning 14% of the market share. Tesla being the number one owner of the EV market means as the EV market grows, so do Tesla’s sales numbers.
As long as the EV market grows steadily, Tesla has no incentive to dip into paid advertising. Rather, they can enjoy the free bump in sales as the EV market continues its natural growth pattern.
9. More Effective Avenues To Reach Customers
Tesla may not spend any money on traditional advertising, but they incorporate advertising into their business in more modern ways. For example, Tesla has used Tesla.com to focus on search engine optimization (SEO).
Tesla incorporating SEO into their business has been successful so far, considering if you search a query related to Tesla, Tesla.com will almost always be on page one of search results.
Another way Tesla has gotten creative with getting its name out there is through Tesla Supercharging Stations. There are over 30,000 Tesla Supercharging Stations around the United States. Since Tesla’s logo is plastered across supercharging stations, each one acts as a Tesla billboard.
Tesla is smart to advertise through non-traditional means like SEO and supercharger billboards because the cost of this guerrilla advertising plan is significantly lower than traditional advertising.
The cost of SEO is hiring writers for blog posts, and Tesla already provides supercharging stations, so the cost is free for their supercharger billboards.
Fun fact: Elon Musk said on Twitter that Tesla does not pay for advertising so they can spend more money on innovating the product. Tesla prefers to spend money on innovation rather than advertising, and this can be seen in its research and development (R&D) budget.
Hey! I just found another reason Tesla doesn’t do any advertising!
Less money for advertising means more money for innovation! Brilliant!!
Visual Capitalist made a beautiful infographic to illustrate the increase in R&D spending between Tesla and other car manufacturers. My main takeaway is that Tesla spends almost three times more on R&D compared to competing car manufacturers like Ford, Toyota, and General Motors.
Per car, Tesla spends $2,984 on R&D compared to Ford spending $1,186. Additionally, Ford spends $468 on advertising per car, while Tesla spends $0.
You can easily see how Tesla’s lack of advertising presence allows them to spend more on innovation through research and development.
You’re in luck if you want to see how Tesla’s R&D budget is incorporated into its day-to-day operations! Check out the YouTube video below from Tesla Vision:
Frequently Asked Questions
What Is Tesla’s Biggest Expense?
Tesla’s biggest expense is its cost of goods. The cost of goods refers to the cost of materials to manufacture a vehicle. Tesla’s cost of goods accounted for 83% of its total expenses in 2019.
What Car Company Spends the Most on Advertising?
General Motors spends the most on advertising out of all car companies. In 2020, General Motors almost spent $2.22 billion on advertising. Ford was far second, spending $1.82 billion in advertising.