Recently, I read an article on Dyson regarding its decision to launch an electric car model by 2020.Truly surprised by this bold decision, I wondered whether such decision could lead to profitability, especially given the lack of experience Dyson—a home appliance brand—has in car industry and also the monopoly Tesla holds in the electric car market.
A screenshot of Dyson’s pricey vacuum cleaners from dysoncanada.ca
How was Tesla able to generate its success? Well, several external factors provided Tesla a good environment to grow: Most evidently, technology and ideas in energy conservation is developing faster than ever, allowing Tesla to make breakthrough in electric car models. Politically, US supports resource conservation and allows Tesla to secure a $465 million loan from the U.S. Department of Energy. Most importantly, with the economic growth in the Western countries, people are willing to spend more on vehicles; meanwhile, they are more aware of the environmental compacts and move towards a direction of healthier life style. Tesla targets this specific customer segment and offers focused and differentiated products—high-end electric sports cars—which no other company offered, forming a niche that allowed Tesla to expand so quickly.
I suspect that Dyson will be able to obtain a similar success in the electric car industry.
Dyson has been successful on developing the solid-state battery technology, which will sure make its entry barrier to the electric car industry lower; however, Dyson is not the only company that realizes the profitability of electric cars—Porsche, Audi, and BMW are all developing electric car models that will hit the market around 2020. Those companies have an even smaller entry barrier since this new products still share similar technology, customer segments, distribution channels, and suppliers in production. Although the electric car industry has a fast growing demand, the large number of new entries will make the market extremely competitive; therefore, although the entry barrier is lower, the barrier to success will be quite high.
Furthermore, being a brand famous for vacuum cleaners, Dyson will have to spend more time in trying to attract customers. Unless Dyson’s value proposition is very unique and offers attractive POD, it will not have any more advantage in attracting customers than other companies like Porche, Audi, and BMW who already built a customer base in the industry.
Of course, another direction Dyson could choose to go is cost leadership, but Dyson already warned customers that this will be an expensive model, eliminating that possibility. After all, why would customers choose Dyson over BMW or Porche though, if the products are similar and are at similar price? That, will be up to the value proposition and marketing strategy that Dyson decides to take.
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References:
7 Reasons Why Tesla Has Been So Successful. (2017, September 30). Retrieved October 28, 2017, from The Economist website: https://www.economist.com/news/britain/21729726-apple-abandoned-electric-vehicles-too-complicated-can-vacuum-cleaner-king-do
Steinbuch, M. (2015, January 22). 7 Reasons Why Tesla Has Been So Successful [Blog post]. Retrieved from Blog Page of Maarten Steinbuch website: https://steinbuch.wordpress.com/2015/01/22/7-reasons-why-tesla-has-been-so-successful/
Vincent, J. (2017, September 26). Vacuum company Dyson is building an electric car. Retrieved October 28, 2017, from The Verge website: https://www.theverge.com/2017/9/26/16368196/dyson-electric-car-vehicle-announcement
Images:
Dyson’s pricey vacuum cleaners [Photograph]. (n.d.). Retrieved from http://www.dysoncanada.ca/en-CA/shop/vacuum-cleaners.aspx
PEST Analysis Diagram [Map]. (n.d.). Retrieved from https://www.strategicmanagementinsight.com/tools/pest-pestel-analysis.html