Legacy automakers have massive advertising budgets, but Tesla has chosen a different path. It doesn't invest in advertising since it uses social media, as well as the assistance of fans and owners to spread the good word.
Tesla has also learned that steering the extra funds toward research and development (R&D) is proving to be a major key to its success. In fact, according to a recent report by Visual Capitalist, Tesla spends more on R&D than any other automaker across the globe. The data was based on the total value and direction of investments per vehicle sold. According to Tesmanian:
"Visual Capitalist surveyed the 2020 10-K filings of traditional automotive companies to see how much each of them spends on advertising and R&D per vehicle produced. The results were astounding, as Tesla is the only manufacturer in the industry to spend $0 on advertising while nearly $3,000 on R&D per vehicle."
It would seem like common sense that investment in R&D secures a company's future, so long as those investments lead to a successful product. We're almost certain to see larger investments from other automakers competing with Tesla as they work to transition to electric vehicles. However, if they can't sell those EVs, they may turn to increased marketing. Of course, that only applies if they actually want to sell electric cars.
While some OEMs have finally started advertising their new and upcoming EVs, it's likely too soon to determine if the advertising is leading to increased sales. One could easily argue that R&D would lead to stronger sales if it meant better, more compelling vehicles. However, the positive financial impact of R&D is something that takes time to measure.
That said, it's interesting that most automakers are quick to spend money on marketing, yet slow to up their investments in R&D. At the same time, as the industry is transitioning to greener vehicles, the way in which automakers choose to invest must change as well. What worked in the past with gas-powered cars may not be the way forward.
Tesla's impressive $2,984 R&D investment per vehicle is comparable to that of the next three automakers combined. Meanwhile, legacy OEMs spend an average of $495 per vehicle on marketing. Even if these OEMs stopped spending on marketing and shifted those funds toward R&D, they'd still be far behind Tesla's R&D investment per vehicle. If Ford made the switch, it would only increase its R&D spending to about $1,700 per car.
Be sure to head to Visual Capitalist by following the source link below. There, you'll find more details, as well as a helpful chart. Then, head down to the comment section and leave us your words of wisdom.