7 Ways Tesla Could Boost Profits
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Tesla’s growth in recent years has been phenomenal, something for the history books and economics textbooks. It is also what some of us predicted 10 years ago. Most seemed to doubt Tesla’s growth potential, but the path forward seemed clear, and it was clear enough that Tesla rose to the enormous size it is now. However, many of us have also said that Tesla’s sales growth had to tail off at some point. The company couldn’t grow at 50% a year without serious technological breakthroughs and a few minor miracles. One of its two high-volume models became the best selling vehicle in the world, but there’s only so much growth you can expect after that. When you’re already getting more sales than any other model, how much room is there for growth?
So, until Tesla has more high-volume models competing in new segments and getting enormous sales, the question for Tesla (and Tesla stockholders) is: how does the company boost profits and growth to justify its rather high market cap? I’m not going to pretend that I have perfect ideas, have done a thorough financial analysis, or know for sure that any of these things below would work. However, these are the ideas that have been simmering for a while. I’ve seen lengthy discussions about some of them, and very little discussion about others.
Raise Supercharging fees. As I noted in my previous article, Supercharging has been Tesla’s “killer app” for a while. Many people have bought Tesla vehicles primarily because of access to the Supercharger network. In 2024, non-Tesla EVs in the US are supposed to have adapters that allow them to Supercharge, and in the coming years, non-Tesla EVs are supposed to be designed and built with this charging standard (NACS) so that no adapters are needed. Considering availability, convenience, reliability, ease of charging, and reputation, Tesla has a massive competitive advantage here — a semi-monopoly — and it could milk that with higher rates that boost the company’s profits. That’s not to say there’s full freedom here. There are competitors who could try to win market share with lower prices, and there are regulations in some, or even most, states that don’t allow the company to charge more than a certain amount for electricity. However, in the latter case, Tesla could also shift to time-based pricing.
Tesla stores and cafes at Superchargers. On the same overall topic, Tesla has always left a lot of money on the table by not selling anything at Superchargers. Gas stations don’t make money on the gasoline they sell. They make money on the snacks and drinks they sell inside the store. Whether through automatic kiosks and vending machines or many more small stores at Supercharger stations, Tesla could make a lot of money by selling more than just electricity at Superchargers. Also, if the company designed and built attractive little cafes as centerpieces of Supercharger stations, or even large regional attractions at major stations (with cinemas, exercise facilities, kids play areas, etc.), Tesla could improve the quality and cleanliness of stations and attract even more buyers to the brand. I understand that many stations are currently in Wawa parking lots and such, but that’s not how it has to be done going forward, and there also have to be some locations where Tesla could add these kinds of things with a permit or two and a little extra land.
Do a better job selling solar. Tesla’s solar sales are a bit of a disappointment. When Tesla acquired SolarCity (which many saw as a bailout to Elon Musk’s cousins, and himself), there was much talk about the synergy between solar and EVs and how Tesla could much more efficiently and effectively sell solar. Alas, it’s been hard to find any strong sign of that. Tesla sends out emails to its EV owners from time to time encouraging them to buy solar systems, but they have been quite bland and lame marketing attempts. There are so many creative pitches Tesla could be making to owners that would likely drive more sales. I could write dozens of newsletters that I’m sure would be much more inviting and convincing. In the stores, Tesla could present its energy products much more prominently and attractively, and could train staff to sell it better. Right now, the energy products are like a side note pushed into the corner near the broom closet* and more or less ignored. (*Not literally, but that’s what it feels like.) Aside from basic marketing improvements, Tesla could get its foot in the door better with something like free home visits and consultations (personalize it), quick surveys when Tesla mobile service techs visit, and other creative efforts. It just feels like no one is putting any effort into this, no one is trying anything new, and this is a forgotten aspect of the company. And a 36% drop in solar deployment year over year is the result. (Add on the fact that there was a rush to install rooftop solar in California last year before net metering changed, and 2024 will be a tougher year for rooftop solar.)
Instead of cutting prices more and more, advertise effectively. This is one of the most common matters discussed over the past several months or even years. Many Tesla shareholders feel Tesla should do more conventional advertising in order to stimulate sales, especially as an alternative to cutting prices. I’ll count myself in that crowd. I think most consumers are still clueless about Tesla, clueless about electric cars, and have all sorts of misinformation in their heads — regarding pricing, charging, safety, and other matters. And I don’t think advertising on X or YouTube is the smart way to go. Tesla has long been established as a hot topic of social media where young people live. Tesla needs to reach more conservative, older, richer buyers. Perhaps YouTube is even a good place for that now, but I think normal TV advertising could be the most effective for Tesla. Even creating an expensive but effective Super Bowl ad seems like the kind of thing that could make a big difference, at a lower cost than dropping vehicle prices. Tesla is a cutting-edge company, but sometimes cutting-edge companies need to engage in more conventional ways in order to reach more people. I could see Tesla TV ads being very effective for that.
Tesla communities. Granted, this one would require major investments and financing, but it’s an idea I highlighted several years ago that I think would have been great started back then and could still make the company a killing. I also talked with a multi-millionaire or probably billionaire green real estate developer (who was an avid CleanTechnica reader) about it a bit and he seemed to be on the same page about it. How many people would happily live in Tesla communities with houses and community facilities tailored to Tesla vehicle ownership, Tesla energy storage and generation technology, and Tesla design? Indeed, much of the potential here has been killed by Elon Musk’s side tangents (including a lot of misinformation), but there are also plenty of people who align with Elon on those things or who pay no attention to them but love Tesla tech. Also, let’s keep in mind that Elon ≠ Tesla, and perhaps he won’t be leading Tesla by the end of the decade.
Robots. As I wrote a couple months ago, I currently lean towards thinking that Tesla will be able to make a lot of money selling factory robots in a year or two. I do think this is now a focus area for Tesla and we’ll see some good news from this arm of the business before too long. However, the skeptical side of me is concerned this is another FSD-like hype machine that isn’t going to amount to much. So, I go back and forth on this, but I do lean toward the belief that Optimus can be developed into a good product and profit machine for Tesla, and that seems to be Elon’s focus at the moment.
Increase Tesla service prices. As I just wrote this morning, Tesla may have increased service pricing enough that it’s now making a profit on service. Or not. The accounting is unclear, with several different elements of the business lumped together. In any case, it’s well known that dealers make a lot of their money on service and auto manufacturers make money supply parts for older models, and Tesla could give itself a financial boost by raising service and parts costs. This is one thing some critics have said about Tesla for years — it has too much of a monopoly on service and there’s not the free-market competition needed to help protect customers from overpricing. But hey, if Tesla needs to boost profits, it seems clear that this is one easy place they could do that.
I’m sure there are many more ideas out there. I’m sure some of the ideas above are not good ones. Let us know down in the comments what your thoughts are on how Tesla could boost profits in 2024 and beyond.
I almost included the following as another option, but I decided against it … but not enough to not include it as a footnote:
Cut FSD costs. I know I’m going against the grain here, but I don’t think Tesla has been particularly effective or efficient at developing Full Self Driving. Maybe it will reach Level 4 or Level 5 autonomous driving, maybe not, but in either case, I imagine there must be some bloat here in which Tesla could cut costs. A lot of compute power, a lot of machinery, and a lot of software engineers are being used to make very little progress on FSD. I know there’s the whole sunk costs fallacy and it would be extremely hard for Elon Musk to change directions on this, but the company could probably benefit from some cost cutting in this division and a little more skepticism about what is going to work to get Tesla vehicles to robotaxi capability.
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