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Comparing Tesla’s Spending on R&D and Marketing Per Car to Other Automakers

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The Briefing

  • Tesla spends $0 of its budget on advertising, but instead spends a dramatic amount on research and development (R&D)

Tesla’s Spending Per Car Sold vs. Other Automakers

It’s often said that word of mouth is the best form of advertising.

In the case of Tesla and their rapid ascent to the top of the global automobile business, this might be true. After all, the electric vehicle company somehow manages to spend $0 on advertising year after year, despite the fact that marketing is typically a significant expense line item for most other auto manufacturers.

On the flip side, Tesla is spending an average of $2,984 per car sold on research and development (R&D)—often triple the amount of other traditional automakers.

AutomakerR&D spend per car soldAd spend per car soldR&D per dollar of advertising
Tesla$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 sold basis, Tesla’s $2,984 in R&D spend per car is far greater than that of other car manufacturers. It’s even higher than the collective amount going to R&D per car from three of the other automakers (Ford, GM, and Chrysler) combined.

When it comes to advertising, the average spend among traditional automakers is $495 per vehicle. And while Tesla technically spends nothing on advertising, the company is a marketing machine that is rated as the world’s fastest growing brand, and Tesla often dominates press mentions and social media chatter.

Capital Allocation: R&D and Advertising

The balance of expenditures between R&D and advertising is part of capital allocation, a decision every business needs to make. Generally speaking, more R&D can improve and advance the quality of either your goods or service, relative to your competitors. If executed correctly, it has the potential to lead to greater pricing power that will reflect in the margins.

In contrast, advertising can spread awareness and promote the business. But it’s a tricky balance that isn’t always easy to get right.

While capital allocation is vital, one factor that differentiates Tesla from the rest, is Elon Musk himself. With over 60 million followers on Twitter, his wild popularity has no doubt aided in Tesla’s brand recognition, where they’ve arguably become synonymous with the electric vehicle revolution.

Automobiles Of Tomorrow

For Americans, 85% still use an automobile as their primary method of transportation to work. As a result, automobiles will likely undergo a serious shake up as the world continues on its path towards a greener future.

With increasing investments made in the electric vehicle space—poised to be worth a trillion dollar market by 2028—how will R&D and advertising budgets of tomorrow look for major automobile companies?

Where does this data come from?

Source: 10-K Filings
Notes: Data covers automobile figures for 2020

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Economy

Charted: Public Trust in the Federal Reserve

Public trust in the Federal Reserve chair has hit its lowest point in 20 years. Get the details in this infographic.

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The Briefing

  • Gallup conducts an annual poll to gauge the U.S. public’s trust in the Federal Reserve
  • After rising during the COVID-19 pandemic, public trust has fallen to a 20-year low

 

Charted: Public Trust in the Federal Reserve

Each year, Gallup conducts a survey of American adults on various economic topics, including the country’s central bank, the Federal Reserve.

More specifically, respondents are asked how much confidence they have in the current Fed chairman to do or recommend the right thing for the U.S. economy. We’ve visualized these results from 2001 to 2023 to see how confidence levels have changed over time.

Methodology and Results

The data used in this infographic is also listed in the table below. Percentages reflect the share of respondents that have either a “great deal” or “fair amount” of confidence.

YearFed chair% Great deal or Fair amount
2023Jerome Powell36%
2022Jerome Powell43%
2021Jerome Powell55%
2020Jerome Powell58%
2019Jerome Powell50%
2018Jerome Powell45%
2017Janet Yellen45%
2016Janet Yellen38%
2015Janet Yellen42%
2014Janet Yellen37%
2013Ben Bernanke42%
2012Ben Bernanke39%
2011Ben Bernanke41%
2010Ben Bernanke44%
2009Ben Bernanke49%
2008Ben Bernanke47%
2007Ben Bernanke50%
2006Ben Bernanke41%
2005Alan Greenspan56%
2004Alan Greenspan61%
2003Alan Greenspan65%
2002Alan Greenspan69%
2001Alan Greenspan74%

Data for 2023 collected April 3-25, with this statement put to respondents: “Please tell me how much confidence you have [in the Fed chair] to recommend the right thing for the economy.”

We can see that trust in the Federal Reserve has fluctuated significantly in recent years.

For example, under Alan Greenspan, trust was initially high due to the relative stability of the economy. The burst of the dotcom bubble—which some attribute to Greenspan’s easy credit policies—resulted in a sharp decline.

On the flip side, public confidence spiked during the COVID-19 pandemic. This was likely due to Jerome Powell’s decisive actions to provide support to the U.S. economy throughout the crisis.

Measures implemented by the Fed include bringing interest rates to near zero, quantitative easing (buying government bonds with newly-printed money), and emergency lending programs to businesses.

Confidence Now on the Decline

After peaking at 58%, those with a “great deal” or “fair amount” of trust in the Fed chair have tumbled to 36%, the lowest number in 20 years.

This is likely due to Powell’s hard stance on fighting post-pandemic inflation, which has involved raising interest rates at an incredible speed. While these rate hikes may be necessary, they also have many adverse effects:

  • Negative impact on the stock market
  • Increases the burden for those with variable-rate debts
  • Makes mortgages and home buying less affordable

Higher rates have also prompted many U.S. tech companies to shrink their workforces, and have been a factor in the regional banking crisis, including the collapse of Silicon Valley Bank.

Where does this data come from?

Source: Gallup (2023)

Data Notes: Results are based on telephone interviews conducted April 3-25, 2023, with a random sample of –1,013—adults, ages 18+, living in all 50 U.S. states and the District of Columbia. For results based on this sample of national adults, the margin of sampling error is ±4 percentage points at the 95% confidence level. See source for details.

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