Tesla continues to transform the auto market and entrepreneurs have taken notice. The data shows the automotive aftermarket will be worth over $433 billion by 2021. That’s a 16 percent growth in three years! Today, the auto industry is worth billions of dollars and continues to grow because of these key players: Fiat Chrysler, Ford, General Motors, and now, Tesla.
Tesla started out with high-end sedans and today, the car company is known for its sleek, modern electric models that are energy-efficient and self-driving. Their latest automotive invention, the Cybertruck, looks just as futuristic as it sounds. Imagine a Mars Rover or a Transformer. It doesn’t look like your average, heavy-duty pickup truck. So, that’s the best way to describe Tesla, they aren’t your average car dealership. They are a game-changer when it comes to renewable energy vehicles, and within the next 20 years, most cars will be electric.
Ford, Chevy, and other big names in the car business want to keep up with Tesla and sell cars with renewable energy, and entrepreneurs who follow the auto market want to join the industry as well.
The Tale of Tesla and The Brains Behind It
So, how did Tesla become the billion-dollar, innovative automotive company it is today? It started in 2003 when two guys, Martin Eberhard and Marc Tarpenning, noticed General Motors Company, home of Buick, Cadillac, GMC, and Chevrolet, recalled its first electric vehicle, the General Motors EV1. They crushed all-electric cars in a junkyard, despite protests from the general public and customers who already owned the vehicles. EV1 owners even held a candlelight vigil to protest the death of their cars. That’s when Tesla Motors was born, but the company needed a smart investor to help them get the wheels turning on their business.
That’s When Genius Elon Musk Comes In…
Elon Musk is an entrepreneur, businessman, and tech genius who founded Paypal, SpaceX and made Tesla the automotive leader it is today. Musk is incredibly smart and his fascination with technology started at a young age. At 17, he moved from South Africa to Canada to attend university and avoid mandatory military service. A couple of years later, he left Canada to study business and physics at the University of Pennsylvania. Then, he pursued a Ph.D. in energy physics at Stanford University but dropped out after two days to join the big Internet boom.
Musk took an entrepreneurial risk to launch his first company, Zip2 Corporation and it was incredibly successful. He sold it to Compaq Computer Corporation and made $307 million. With all this money, Musk decided to create Paypal, and at 22 years old, he earned his first billion-dollar paycheck after Paypal was acquired by eBay for $1.5 billion in stock.
His other business ventures include SpaceX, an aerospace manufacturer, and space transportation services company, and Tesla. He saw big car companies killed off their electric vehicle programs and Tesla was their one shot to create an EV-only company, but it was a huge risk to take. Today, it has a wide range of electric car models and Musk has a net worth of around $23.6 billion. And, he hasn’t taken a single paycheck from Tesla. In fact, Musk will be paid nothing for the next 10 years until the company reaches $100 billion. If this happens, Musk will officially be the richest person in the world!
Tesla Stock Is Constantly Moving. So, What is Tesla’s Business Strategy?
Tesla’s stock is unique from other automotive businesses because it is always going up and down. But, why is that? There are many factors, but Tesla’s innovative business model is different from traditional car dealerships, and this can possibly contribute to the fluctuation of their stock. Their business model is a three-pronged approach:
- Direct sales through showrooms, online, and urban centers, such as shopping malls.
- Service centers where Tesla owners can visit the company’s technicians, called Tesla Rangers, to fix any issues they have with their vehicles. Many issues can be fixed wirelessly, so owners don’t need to physically bring the car in.
- Tesla’s supercharger networks include stations nationwide where owners can charge their car for free and it only takes about 30 minutes to charge up.
Apple Talks with Tesla About Buyout
It was later revealed that Tesla founder Elon Musk once reportedly tried to get Apple CEO Tim Cook to buy the electric car company when it was bleeding cash, but the offer was ultimately turned down.
“During the darkest days of the Model 3 program, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla (for 1/10 of our current value),” Musk tweeted. “He refused to take the meeting.”
Since then, Tesla’s stock has surged more than 650% since the onset of the coronavirus pandemic in March 2020, taking the company value to over $600 billion, making it the most valued automaker in the entire world and the 7th largest company in the United States by market cap.
So, What’s the Difference between Tesla vs. A Car Dealership?
Tesla’s approach to car sales is different than how cars were sold in the old days. Ford, Chevy, all the big names in the car industry usually sell their vehicles at a car dealership, not online, and this is still true today. Tesla also wants control in the sales of their vehicles, whereas car dealerships serve as the middle man for automotive manufacturers who want to sell their cars.
Well, I want to open an automotive business, where do I start?
Well, based on what Tesla does in the market, everyone wants to know where the auto industry is headed and what’s the next step in the market. The auto industry wants to pursue renewable energy with their vehicles. Ford, Chevy, Cadillac, all the big names in the car business want to go down the renewable energy route like Tesla.
Entrepreneurs inevitably want to get into the market, so they are looking into ways to achieve that. While they can’t own a Tesla franchise, there are other ways to be involved in the automotive industry. What they do is analyze the markets that could work with Tesla, such as the car supplies and repairs route. They also analyze whether or not they should start their own automobile business or pursue a franchise.
With the franchise model, entrepreneurs earn the independence of small business ownership supported by the benefits of a bigger business network. They receive proper training, secure finance for a franchise, and it’s less money than to start a business from scratch.
Here are five popular automotive franchises that entrepreneurs say will hit that market:
Midas sells automotive parts such as brakes, pads, drums, tires, mufflers, and more. Customers can visit a Midas Shop for car supplies and equipment. They also have an online store where consumers can purchase new tires.
- Financial Data (per Midas 2019 FDD)
- Initial Franchise Fee: $30,000
- Startup Costs: $181,650 – $459,587
Tread Connection is a car repair franchise that provides home, work, and roadside assistance for customers with car troubles.
- Financial Data (per Tread Connection 2019 FDD)
- Initial Franchise Fee: $37,500
- Startup Costs: $98,600 – $162,200
Carsmetics is an automobile repair service that primarily focuses on drivable accident repairs.
Tuffy Tire and Auto is a retail, automobile service center that provides air conditioning replacement, diagnostic services, regular car maintenance, tire services, and more.
- Financial Data (per Tuffy Tire and Auto 2019 FDD)
- Initial Franchise Fee: $30,000
- Startup Costs: $269,600-$2,779,547
Fleet Services International services and maintains commercial business or government fleets of all sizes.
Take the wheel and pursue the automobile industry today
The automobile industry continues to adapt to what consumers want. The market continues to change and franchises like Ford, Chevy, and Cadillac want to keep up with Tesla and get involved with renewable energy. The automobile market includes many sectors, like car repair shops or car supply stores, so like Elon Musk, entrepreneurs can look at these opportunities, analyze the markets, follow their entrepreneurial instincts, and get involved with the automobile industry.
By Ana Borruto and Jim Notaris