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4 Charts Showing How Tesla Thrives With $0 Advertising Spend

4 Charts Showing How Tesla Thrives With $0 Advertising Spend

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Tesla’s $0 Advertising Spend Is Attracting Customers And Investors Everywhere

Tesla Motor’s commitment to a $0 advertising budget is no secret to consumers or investors. The burgeoning car company has no advertising team, no CMO, and no ad agency. Even so, Tesla is one of the most trendy and sought-after car brands in the automotive industry and it’s building name recognition that rivals its legacy competitors — without the help of advertising.

Let’s take a closer look at Tesla’s advertising and marketing strategy (or lack thereof) to better understanding brand recognition in the auto industry.

Tesla's Production Numbers

Though Tesla is a household name and a global brand, its production capacity is still limited. Tesla produced just 84,000 vehicles in 2016 — paltry in comparison to Volkswagen’s 10.5 million vehicles and Ford’s more than 6.5 million.

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Tesla Vehicle Production Number

Tesla’s low production numbers are likely the result of introducing a completely novel product with a high price tag. That said, as Tesla completes its new factories and rolls out its newest and most affordable car, the Model 3, total annual vehicle production numbers are expected to increase.

Tesla's $0 Advertising Spend

The differences between Tesla and the other automotive companies are even starker when comparing advertising strategies. Since it was founded, Tesla has spent $0 on traditional advertising.

Tesla Advertising Spend Budget Zero

Its competitors, on the other hand, are spending billions on TV ads, billboards, digital banners, and more. American brands Ford and GM are spending approximately $4.3 billion and $5 billion respectively, and German luxury brand BMW spent over $3 billion.

Tesla's Market Capitalization

The sense that Tesla’s an extraordinary presence in the auto industry doesn’t stop with its ad budget, though. It’s also putting up some stellar (and baffling) numbers in market capitalization. By the end of the first quarter in 2017, Tesla’s market value reached $51.6 billion, towering over American competitor Ford at $44.9 billion despite losses and limited production.

Tesla Market Capitalization Percent Change

Looking at a two year period between Q1 of 2015 and Q1 of 2017, all car brands except for Tesla saw a negative change in market capitalization. Where Ford’s market capitalization saw a decline of over 20%, Tesla’s market capitalization grew by approximately 45%.

Tesla Net Income vs Market Cap

What Does This Mean For The Auto Industry?

Despite low production numbers, lackluster revenue, and consistent losses, Tesla is still a hit among investors. So where is investor confidence coming from?

While some of it might be Tesla’s unique position and product within the automotive industry, some of it might also be attributed to the organic conversations and excitement surrounding Tesla’s brand. Tesla isn’t just another car company, but a brand that represents innovation and a total sense of newness in an industry that’s begging for disruption.

Customers and car enthusiasts are buzzing about Tesla products, which means that Tesla has little to do when it comes to raising brand awareness. Whether or not Tesla can keep its ad spend at $0 remains to be seen, but for now, consumers are keeping Tesla in the conversation and ensuring that it’s never far from minds or headlines.

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July 27, 2017 By Mediakix Team

  • Outspider

    Tesla Motor’s commitment to a $0 advertising budget is no secret to consumers or investors.

    Tesla’s advertising budget has not been $0 for many years. From Tesla’s most recent annual report.

    Marketing, Promotional and Advertising Costs

    Marketing, promotional and advertising costs are expensed as incurred and are included as an element of selling, general and administrative expense in our Consolidated Statements of Operations. We incurred marketing, promotional and advertising costs of $48.0 million, $58.3 million and $48.9 million for the year ended December 31, 2016, 2015 and 2014, respectively.

    Advertising Costs

    Advertising costs are expensed as incurred and are included as an element of sales and marketing expense in the consolidated statements of operations. The Company incurred advertising costs of $26.3 million, $28.6 million and $3.4 million for the years ended December 31, 2016, 2015 and 2014, respectively.

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