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Tesla Motors Inc (NASDAQ:TSLA) Model X Strategy Apes Apple Inc. (AAPL) Style

Tesla Motors Inc Model-X

Tesla Motors Inc  has revealed that Ganesh Srivats will head up its North American sales team at a key time for the firm. Mr. Srivats joined the firm from Burberry, marking yet another example of Elon Musk’s firm following in the footsteps of Apple. Cupertino hired Angela Ahrendts, former CEO at the British fashion house, last year.

Tesla Motors Inc Model-X

Mr. Srivats will be the chief of North American sales at Tesla Motors as the firm ramps up to the launch of the Model X, the most important move the firm has made since the launch of the Model S in 2012. Elon Musk says that the Model X will double his firm’s car sales, and Mr. Srivats will be a key part of that push.

Making Tesla Motors different

Tesla Motors doesn’t do any traditional advertising, but the firm relies on word of mouth and positive brand perception in order to ensure its sales stay strong and it keeps growing. Analysts looking at Tesla Motors seem sure that Mr. Srivats can help to do just that.

 

Scott Galloway, a marketing professor at the Stern School of Business at NYU told Bloomberg that “Tesla is not an automobile company, it’s a luxury company.” That’s the exact kind of change that Apple was lauded for when it brought Ahrendts on board, and it’s having a positive impact on shares, and Wall Street’s appreciation of the firm.

Trip Chowdhry, a bullish Tesla Motors analyst at Global Equities Research, said in a report on the hiring announcement that “Tesla has its own Retail Stores, its own Gas Stations, its own Refineries, hence we think hiring Ganesh Srivats from Burberry makes sense.”

Hiring from an established auto brand isn’t a right fit for Tesla Motors because the firm, as Mr. Galloway said, is not in the car business right now, it’s selling a luxury to richer consumers.

Following Apple in sales

A change in the phone market, and the way in which Apple saw itself, brought Angela Ahrendts to the firm. The former Burberry chief was brought on board in order to make a product like the $10,000 Apple Watch appeal to the firm’s phone users.

With no sales numbers on hand, it’s not clear how much of a success she has been at the firm so far. She clearly has long term ambitions, however, and Tim Cook is willing to let her work away in order to change the face of Apple.

Tesla Motors is in the same sort of bind. It’s known, right now, for being a very innovative firm, and that its cars are very good for the environment. Elon Musk knows that’s not going to sell a lot of units of the Model X, and he wants to show more and more consumers that a Model X can be so much more than an electric car that saves on gas.

In picking a role model, Mr. Musk could do a lot worse than Apple. The firm recently recorded the biggest single quarterly profit in corporate history, and it’s striving to find more ways to sell the goods it makes to those that can afford them.

Up-selling the Model X

Burberry is one of the fashion houses that truly embraced the digital revolution and used new tech in order to add value to its products. Burberry, under both Angela Ahrendts and Ganesh Srivats, sold a lifestyle to those buying its fashion products. Tesla Motors will want to do the same with the Model X.

The SUV EV is designed to be a one-stop auto solution to the needs of any busy family, but it’s likely to carry a price tag that will make most looking at an SUV balk. Tesla Motors needs to show those looking for a new car that spending extra in order to secure the Model X is worth it.

That’s what Apple has done with the iPhone, and why the firm will be able to sell a $600 phone 250m times in a single year. There’s lots of other firms that offer a similar product and many of them are just as good as the iPhone 6.

People still choose the iPhone, however. Tesla Motors needs to show that the Model X is worth the same kind of premium as a smart phone from Apple.

Mr. Srivats will have his work cut for him as he tries to do that, but his job may be easy to begin if those looking at the firm on Wall Street are right about its short and medium term prospects.

Making the first steps with the Model X

Trip Chowdhry, who welcomed the hiring of Mr. Srivats, says that Tesla Motors is on track for a great year. He reckons the firm will beat its sales targets for 2015 and put itself in a position to grow by a huge margin next year. Elon Musk may be looking to sell 55,000 cars in 2015, but Mr. Chowdhry is looking for sales of more than 62,000.

In a report published on Monday morning, Mr. Chowdhry said that he thinks the Model X will be “a Q4’15 and Beyond Phenomenon.” He says that about 80 percent of the robots needed to build the car are in place at Tesla’s factory in Fremont California right now.

He’s expecting a web page with the stats and package picker for the Model X will go live at some point in August. That site will allow those that have already put down a deposit for the SUV to look at the options and choose what they want their Tesla to look like, and what extras they’d like to include.

Mr. Chowdhry added that Tesla could add an additional production line which would boost production of the Model X by up to 90 percent if demand supports that in the months after launch.

Others on Wall Street aren’t quite as bullish on those sales numbers, but they are secure in their forecasts that Tesla Motors will hit its targets. Brad Erikson of Pacific Crest says that reviews of the Model X will likely be strong on release, and that could save the firm’s shareholders from a painful “sell the news type of scenario.” He reckons Tesla will meet its own targets for the full year.

Baird’s Ben Kallo reckons that demand for the SUV is going to be high from the start, and that should help Tesla Motors get over any teething problems with the launch. Tesla recently got its hands on a $500m credit line that Standard & Poors’ analyst Nishit Madlani says should offer “protection against any potential execution missteps or inefficiencies” in the launch of the new car.

 Bringing Burberry style to Tesla

Once the first splash of the Model X has been made, however, it’s going to take a lot of effort to ensure that long term demand for the SUV stays high. Tesla Motors is going to only sell two models of car until the release of the Model 3 in 2017, and both the Model S and Model X will still be vital even after that car makes it onto the road.

Tesla needs to build a long term relationship with its clients. The firm already fosters incredible loyalty among buyers. 85 percent of Tesla owners in a recent Jeffries survey said that their next car would be from the firm.

Mr. Srivats’ job over the coming years will be to ensure that number stays at that level even as sales of the Model X expand beyond those with passion for the electric car, or those that care deeply for the environment.

Tesla Motors will begin to sell a lifestyle this year, and Mr. Srivats will be at the head of the campaign to put that idea at the heart of the way users think about the firm. His performance will need to exceed that of Angela Ahrendts at Apple in order to make that connection clear to US car buyers.

Update 12:05 EST: Added details about Trip Chowdhry’s report published Monday morning.

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