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Tesla spending per car sold compared to other automakers

Word of mouth is often said to be the best form of advertising.

In the case of Tesla and its rapid rise to the top of the global auto industry, this could be true. After all, the electric vehicle company somehow manages to spend $ 0 on advertising year after year, despite the fact that marketing is generally a major expense for most other automakers.

On the other hand, Tesla spends on average $ 2,984 per car sold in research and development (R&D) – often three times the amount of other traditional automakers.

Car manufacturer R&D expenditure per car sold Advertising spend per car sold R&D per dollar of advertising
You’re here $ 2,984 $ 0 $ 0
Ford $ 1,186 $ 468 $ 2.53
Toyota $ 1,063 $ 454 $ 2.34
General Motors $ 878 $ 394 $ 2.22
Chrysler $ 784 $ 664 $ 1.18

On this per vehicle basis sold, Tesla’s $ 2,984 R&D spend per car is much higher than that of other automakers. This is even higher than the collective amount allocated to R&D per car of three of the other automakers (Ford, GM and Chrysler) combined.

In terms of advertising, the average expenditure of traditional car manufacturers is $ 495 per vehicle. And while Tesla technically doesn’t spend anything on advertising, the company is a marketing machine that’s considered the fastest growing brand in the world, and Tesla often dominates press mentions and social media discussions.

Capital allocation: R&D and advertising

Balancing spending between R&D and advertising is part of capital allocation, a decision that every business must make. Generally speaking, more R&D can improve and advance the quality of your products or services, compared to your competitors. If executed correctly, it has the potential to lead to greater pricing power which will be reflected in the margins.

On the other hand, advertising can raise awareness and promote the business. But it’s a delicate balance that isn’t always easy to find.

While the allocation of capital is vital, one factor that sets Tesla apart from the rest is Elon Musk himself. With over 60 million followers on Twitter, its wild popularity has undoubtedly contributed to the recognition of the Tesla brand, where they have arguably become synonymous with the electric vehicle revolution.

The cars of tomorrow

For Americans, 85% still use a car as their primary form of transportation to work. As a result, automobiles are likely to undergo serious upheaval as the world continues on its path to a greener future.

With the increase in investments made in the field of electric vehicles – which should be worth a trillion dollar market by 2028 – what will the R&D and advertising budgets of tomorrow look like for major car manufacturers?

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