Instead of talking like all the others about EVs being environmentally friendly, Tesla made a sure everyone knew just how exciting driving one was.

Dave Young:

Welcome to The Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients. So here’s one of those.

[Travis Crawford HVAC Ad]

Dave Young:

Welcome back to The Empire Builders Podcast. I’m Dave Young, and Stephen Semple is here. We’re going to talk about an empire that’s boy, it’s been in the news a lot lately, but we’re going back to the early days of Tesla. We’re going to ignore the whole Cybertruck knock down.

Stephen Semple:

Right, but we’re going to talk about the electric car. We are going to talk about that. And if people are interested in terms of some of my views in terms of what’s going on today, Matthew Burns and I did a Sticky Sales Story over on YouTube about what’s going on with Tesla today and the challenges that they’re facing and what has created all of that, especially around brand promise and things along that lines. But for a long time I’ve been wanting to talk about Tesla for a simple reason. So you know how you and I talk about one of the very first things that we will always want to do before we take on company, before you make up the messaging, before you do anything, you got to get really clear on the strategy and you want to always try to find unleveraged assets.

I think I feel like the success of Tesla and how they’ve changed the world and really brought the electric car to the forefront is a great example of that, especially the unleveraged assets. So if we go back to the early days of Tesla and we take a look, or even early days of the electric car, the electric cars were basically being marketed as green. And they were ugly, and they were poor performing and they were dull, and they were uninteresting and uninspiring, and they were basically a golf cart.

Dave Young:

Basically a golf cart.

Stephen Semple:

Yeah, yeah they really were. And didn’t get traction going, didn’t capture the imagination, and really was sort of only this small segment of the population was where the market was, and it wasn’t growing beyond that. And so that’s kind of where the market was. Now, here’s what Tesla did. Tesla changed the whole conversation through an unleveraged asset. And the unleveraged asset was this. When you took a look at an electric motor, if you put a high-powered electric motor in there, you could make that thing accelerate like it’s nobody’s business. So what they did, so while everybody else was going the whole environmental tree hugger conversation, they went, we’re going to make a car that accelerates so fast that you can set your iPhone on the passenger seat halfway up, hit the accelerator and the phone will stay hung there on the car.

Dave Young:

Just from the acceleration.

Stephen Semple:

Just on the acceleration. And will beat most supercars, gas-powered supercars. We could just take this car right off the production line, it could go out and drag race and blow the doors off of pretty much every gas car on the market other than the multi-million dollar supercars. And even a few of those, it was able to beat.

Dave Young:

So up until this point, electric cars and hybrids in particular were, you think about Toyota Prius, right? Or something like that. And you don’t think super performance, you don’t think zippy fast, but you think, oh, I’m just putting along, I’m going to get from here to there, and we’re not going to pollute very much.

Stephen Semple:

And it’s economical and all this other stuff. Tesla comes along and says, so we’ve got this unleveraged asset. We could actually make a car like this. So now where does strategy come in? So what they decide is we’re going to lean into that. We are going to make cars that are super high performance. Now we’re going to make, like when Teslas first came out, they were very expensive cars. What they knew was these people are not green. These people are car guys. They know that there’s car guys that will buy this car because it’ll smoke everything off the line. And yes, we can sell it for several hundred thousand dollars and we’re going to have no dealerships, and people will buy it sight unseen, and it’ll be an internet sensation. We don’t have to advertise. It’ll advertise itself. Everybody will be talking about this.

Dave Young:

Sure. And I think we were, I’m trying to think of the years, early 2000s.

Stephen Semple:

Yes, yes. And we’re all now talking about those cars, and it starts showing up in television shows as being the fancy car. And when you saw a Tesla, it was like, oh holy crap. It was really special. And so strategically what they decided to do was leverage this asset, go for the very, very high end of the market, would be the strategy. And then all along they said, but our goal’s to make a $30,000 car, but we’re going to use this to fund everything. And-

Dave Young:

That makes sense.

Stephen Semple:

… to get enough people out there using it that the infrastructure will start to build. We’ll start getting charging stations and things along that lines because we’re going to get enough of these cars out on the road that this becomes a thing.

Dave Young:

Yeah, this is a huge hurdle.

Stephen Semple:

Huge hurdle.

Dave Young:

Huge.

Stephen Semple:

This is a brilliant strategy because this was not a strategy that the auto industry would create because every new entrant up to this point, every new entrant that had entered the automotive industry in North America that had success, what they all did was-

Dave Young:

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.

[Empire Builders Ad]

Dave Young:

Let’s pick up our story where we left off. And trust me, you haven’t missed a thing.

Stephen Semple:

Every new entrant that had entered the automotive industry in North America that had success, what they all did was start at the bottom end and worked their way up.

Dave Young:

Start with a little economical, tiny model that be fitting a shipping container right then.

Stephen Semple:

Remember what the early Honda Civics were like, right?

Dave Young:

Oh gosh, yeah.

Stephen Semple:

You would start there, cheap car, not particularly well-made, but they’re cheap. And then slowly improve it and move your way up to the stage where they would move up so much that they would actually create another brand, like Hyundai has created Genesis because they knew they reached the point where no one would pay any more money for Hyundai. So now they’ve got to do it.

Dave Young:

You’ve got Acura and Lexus.

Stephen Semple:

Correct.

Dave Young:

Yeah. Those were all…

Stephen Semple:

Correct. Correct.

Dave Young:

Yeah.

Stephen Semple:

So the thinking, if you were an automotive person, strategically, you would look at it and go start at the top and work your way down. That would never work. It would be very, very easy to fall into that thinking. So I’m looking at Tesla and I go, you know what? These guys were absolutely out the gate brilliant because they did exactly what we said to do. Take an unleveraged asset, leverage it, the ability of an electric motor to accelerate like crap. Build a strategy around that unleveraged asset. Okay, we can sell this to car guys, charge us unbelievably premium price, create all this attention, change how people think about electric cars. Think about it. They changed whole dialogue around electric cars.

Dave Young:

Absolutely. And by starting at the top, they became a...

#210: Tesla – Changing the Auto Industry