Should Tesla Pay for Advertising?
Tesla is being forced to hold a vote at their upcoming shareholder meeting on whether the company should pay for advertising. Here's why you need to vote against it.
Want to know how to vote? Click here
Source: Tesla
If you're new to Tesla or their stock, then you might not know that Tesla does not pay for advertising, and never has. You see Elon Musk and Tesla think about marketing differently than most companies. Instead of paying billions of dollars for advertising like all other automakers, Tesla let's its products and its customers do the advertising for them. Tesla has created a car that is unlike any other car. It captures people's attention and imagination. It gives drivers an experience that they've never had before. I'm sure anyone who has had the opportunity to drive a Tesla is familiar with the smile that appears on your face the moment you press the accelerator.
Source: Tech Travel Geeks
What I'm getting at is that Tesla owners love their cars, and they love to tell people about their cars. They love to let their friends ride in and drive their cars. And when their friends drive their Tesla, very often, their friends go buy a Tesla. It's this word of mouth marketing that allows Tesla's demand to continue to grow rapidly without Tesla having to pay a dime for advertising.
Now that being said, could their demand be even higher if they were to pay for advertising? Absolutely, but here's the problem. At the moment they can't even keep up with the current demand. Right now Tesla is doing everything they can to increase production, yet every quarter they sell every car they make. They're even outsourcing battery production to a variety of companies (which they don't like to do) just to meet the current demand. This means that even if Tesla were to pay for advertising, and even if it created more demand for their products, it still wouldn't help them sell more cars. The only reason Tesla, or any company for that matter, should pay for advertising is if it will make them more money. Currently that's not the case for Tesla.
In Tesla's case, paying for advertising could actually be detrimental to the company. Right now Tesla has been able to be profitable in the last four quarters but only by a small margin. Furthermore, if not for regulatory credits that Tesla is able to sell to other automakers, Tesla would not have been profitable at all. Unnecessary ad spending is never a good idea for a company dancing on the edge of profitability. For these reasons, it is very important that Tesla shareholders cast their vote against paid advertising in the upcoming shareholder meeting on September 22.
If you are a Tesla shareholder and you don't know how to vote click here to learn how.