Would Dieter Zetsche still be at the helm of Daimler if the company had only recorded one profitable quarter at a net income level in the last six years? Would Carlos Tavares be still viewed as a turnaround master if PSA Group needed an extra quarter or two to achieve his profit margin targets? Would Carlos Ghosn face little criticism if the Renault-Nissan alliance missed its vehicle delivery target for three quarters in a row?
The answer to all three questions is: No. Meanwhile, Tesla Motors CEO Elon Musk has done all of the above with few if any ramifications from the financial markets.
Tesla's message – that a bright future looms for the innovative, sometimes provocative EV maker – has clearly won over investors. Using sales multiples (the more common earnings-based metrics are impossible given Tesla lost $717 million last year), investors value BMW at a fraction of Tesla even though the German automaker is highly profitable and generates more than 20 times the revenue of Tesla.
While BMW is struggling to make its "born electric," high-tech carbon fiber i3 a global success two years after its launch, the latest Tesla product, the Model 3 that isn't even on the road yet, has already outsold the i3.
Tesla has received more than 400,000 reservations for the Model 3, even though it has not announced the car's exact sales price or said when deliveries will start. The rumor is that the Model 3 won't be in dealers until late 2017.
Tesla's ability to create desire for its products and to build fierce loyalty to its brand resembles what Apple has been able to do. At Apple, the debut of a new operating system is something that customers often celebrate, while the same change at rivals causes most users to feel a mix of dread and despair. Tesla has been able to create a somewhat similar reaction with one of the most disruptive things a vehicle maker faces: a recall. While call backs are a major headache at most companies, Tesla's are nearly hassle-free because many are done remotely using over-the-air technology that requires no customer involvement. Presto, the change is made.
Tesla also appears to have found a way to make mechanical recalls without attracting the same level of attention as its rivals. There are reports that Tesla has kept these fixes in the shadows by having customers sign non-disclosure agreements regarding the work that was done to the vehicles. If this is happening, it is a bit of trickery that only is possible if you have a few thousand cars on the road. Tesla won’t be able to play this game when the high-volume Model 3 debuts. At that point Tesla will be targeting a less forgiving consumer group.
Many could argue that this special bond between Tesla and its first customers would not be possible without a very different type of commercial relationship. The U.S.-based automaker relies on a network of dealers that it owns and operates. In some ways this helps boost customer satisfaction because the customer deals directly with the manufacturer. The problem is that many U.S. states forbid an automaker from selling directly to a customer. That means buyers from those states have to either make their purchase in another state or switch brands.
The big question is whether this distribution model will still work when Tesla reaches its target of half a million unit annual sales by the end of this decade. Probably not. Also, if and when that target is met Tesla – which basically has the premium full-electric sedan market to itself now – will have to compete with rivals from nearly every premium and volume brand on the market. It will be interesting to see if Tesla can retain its uniqueness as the playing field levels, especially when BMW, Daimler and Volkswagen Group spent a combined 22 billion euros on r&d last year while Tesla spent $718 million.
That said, today Tesla continues to rise because it has created a customer experience that is only comparable to what Rolls-Royce and Ferrari have achieved.