Connect with us

Hi, what are you looking for?

Tesla Service. Image courtesy of Tesla.


Tesla Invests in R&D, Not Advertising, & the Results Speak for Themselves

Originally posted on EVANNEX.
By Charles Morris

Automobiles and advertising are symbiotic industries. The auto industry dropped over 14 billion bucks on ads in the US in 2018, a spend second only to that of the (much more fragmented) retail industry. Automakers advertise in every conceivable medium, from TV to radio to print to billboards to the internet — to say nothing of product placements, dealer support, public relations, press junkets and massive political contributions.

In fact, considering that legacy automakers outsource most of the components of their cars, and in some cases even final assembly, to other companies, it’s not a stretch to say that marketing and advertising are their core functions.

But wait — there is one automaker that spends nothing on traditional advertising (although it does lay out for events and other marketing efforts). And how has this company fared in the marketplace? Well, it has rapidly grown to be the largest automaker in the world by market cap, its vehicles consistently outsell competing models in their segments, and it has one of the strongest brands in the history of marketing, right up there with Harley-Davidson or the Grateful Dead.

So, does this mean that massive advertising expenditures are not necessary for automotive success? Well, it sure looks that way. Does this mean that automakers have been squandering billions on unproductive activities for the last century? Well, that could be. What else could the companies have been investing their money in all this time, and how much could they have improved their products as a result?

A recent article from Visual Capitalist looks at the per-vehicle amounts spent on advertising and R&D by some of the major automakers, and it makes interesting reading. The data, which come from the companies’ official 10-K filings, cover the 2020 auto market.

Of the five automakers considered, all except Tesla spend substantial amounts on ads — an average of $495 per vehicle sold. All also invest in R&D to improve their products — but none spends anywhere near as much as Tesla does.

For every car it sells, the California trendsetter plows $2,984 back into R&D, which is more than the US Big Three invest combined. It’s 2.5 times as much as Ford, the second-place R&D spender, and almost 4 times as much as Chrysler, the R&D laggard. Interestingly, Chrysler is also the biggest spender on advertising — $664 per vehicle.

It’s not a coincidence that Tesla’s vehicles are the most advanced on the road, and that the legacy brands are widely considered to be at least five years behind Tesla in terms of battery and software technology. Could they close the gap by moving some money from the ad budget to the R&D center?

“The balance of expenditures between R&D and advertising is part of capital allocation, a decision every business needs to make,” writes Visual Capitalist. “Generally speaking, more R&D can improve and advance the quality of your goods or service, relative to your competitors. If executed correctly, it has the potential to lead to greater pricing power.”

In the more enlightened boardrooms, there’s some soul-searching going on these days. Auto execs are calling crisis meetings, and one even asked the industry’s tormentor, Elon Musk, for ideas about how to dig the industry out of the oily hole it finds itself in. Here’s one: try spending less on inane ad campaigns, and more on bringing your products into the 21st century.

Source / Infographic: Visual Capitalist

Appreciate CleanTechnica’s originality and cleantech news coverage? Consider becoming a CleanTechnica Member, Supporter, Technician, or Ambassador — or a patron on Patreon.

Don't want to miss a cleantech story? Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!

Have a tip for CleanTechnica, want to advertise, or want to suggest a guest for our CleanTech Talk podcast? Contact us here.
Written By

We publish a number of guest posts from experts in a large variety of fields. This is our contributor account for those special people, organizations, agencies, and companies.


You May Also Like


Tesla will stop producing the Model Y at its factory in Shanghai in the last week of December according to an internal memo seen...


Tesla’s electric vehicles are now available throughout many world auto markets, but where can you buy Model Y SUV for the cheapest price? While...


Germany’s plugin electric vehicle share broke new records in November, gaining 39.4% of the auto market, up from 34.4%, year on year. Overall auto...


For the first time in over a decade, the cost of producing a kWh of battery capacity has gone up!

Copyright © 2022 CleanTechnica. The content produced by this site is for entertainment purposes only. Opinions and comments published on this site may not be sanctioned by and do not necessarily represent the views of CleanTechnica, its owners, sponsors, affiliates, or subsidiaries.