Elon Musk claims Tesla has never had a traditional advertising budget. The EV producer doesn't make commercials or run social media ads like most automakers. Instead, it uses that money to reinvest and grow the company. However, while Tesla may not need to advertise since it already can't keep up with demand, there's another reason Musk believes advertising could help.
While the recent Musk interview with various Tesla fans happened some time ago, there are still many juicy morsels coming from the lengthy video footage, which has been broken down into multiple parts. The most recent information relates to Musk's take on advertising.
We've heard Musk say time and time again that Tesla doesn't need to advertise, just like he believes Tesla doesn't need a PR department. However, as the company grows exponentially and is now arguably part of the mainstream, Tesla fans, owners, and investors are encouraging the CEO to reconsider.
During the recent interview, Musk actually went so far as to admit that there may be some advantages for Tesla related to advertising. He basically suggests that rival automakers may get special treatment from the media organisations since the brands buy ads from them. He says automakers are one of the biggest advertisers, and a media outlet isn't likely to write a hit piece about one of its top revenue streams. Musk explained via Teslarati:
“There’s an argument for maybe we should advertise because the traditional media will not run negative pieces about automotive. Because automotive is like one of the biggest—if not the biggest—advertisers in their paper."
Meanwhile, since Tesla doesn't pay media outlets to run ads, and it doesn't have a PR department to combat details in negative hit pieces, it may be at a disadvantage. Musk added:
“So Tesla is basically free game [for traditional media]. Whereas, its safe to say that if they run some negative piece about General Motors right next to a General Motors ad, a General Motors marketing executive would call them and say,’ um—why did you do that?"
According to Teslarati, based on data from Statista, the US auto industry spent over $12 billion on digital ads in 2020 alone. Information from a 2021 10-Q filing reveals that Tesla, which is a much smaller company than many legacy carmakers, spends $0 on advertising and much more than other automakers on Research and Development.
Interestingly, Tesla has also seemingly benefited from other automakers' EV ads, which bring attention to the segment as a whole. Moreover, other brands have teased Tesla in their ads, which also brings attention to the company. In fact, Tesla's orders spiked after the recent Super Bowl, which had a number of EV ads from its rivals.