REPORT ON DIGITAL PRODUCT DEVELOPMENT AT TESLA

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Contents
1. Introduction...................................................................................................................................3
1.1. Tesla...........................................................................................................................................3
2. The Digital Theme and Latest Trends.............................................................................................4
2.1. Artificial Intelligence and Machine Learning Integration........................................................5
2.2. IoT and Smart Connectivity....................................................................................................5
2.3. Digital Twin Technology.........................................................................................................6
3. Primary Target Market for Tesla.....................................................................................................6
3.1. Demographic Segmentation..................................................................................................7
3.2. Geographic Segmentation......................................................................................................8
3.3. Psychographic Segmentation.................................................................................................8
4. Impact of Digital Trends on Tesla...................................................................................................8
4.1. Al and Machine Learning.......................................................................................................8
4.2. Digital Twin Technology.........................................................................................................9
4.3. IoT and Smart Connectivity..................................................................................................10
5. Conclusions..................................................................................................................................11

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1. Introduction
In this era of digital technology, none of the company can survive without adapting
advanced technology in their operations. Whether it is introducing a innovative idea,
developing a product or promoting it among the target customers, nothing can be done
effectively without applying advanced technology to overall operations. All the strategic
business functions can be performed appropriately with the help of digital technology. Like
all other successful organizations, Tesla has incorporated advanced digital trends in various
departments of their company. This report has evaluated that how Tesla applied digital
technology in their new product development process and how the latest digital trends will
affect their product development process and its operations in the coming five years.

1.1. Tesla

Figure 1 TELSA EV

(Hedges & Company, 2019)

Tesla was established in 2003 by Martin Eberhard, Marc Tarpenning, and Elon Musk in
California, USA. Tesla has introduced with an intention to reduce pollution from the
environment. Tesla was founded with a mission to boost the world’s transition to sustainable
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energy and reduce the negative impact of gasoline -power vehicles on the environment. As
indicated by Frick, W. (2016) the transportation sector is the biggest contributor to
greenhouse gas emission and pollution and tesla has introduced the most lucrative electric
vehicles brand that is considered as the fifteen most expensive but valuable brands across
the globe.

2. The Digital Theme and Latest Trends

This report has focused on digital new product development theme and has discussed that
how Tesla has applied this digital theme and has identified the new trends in product
development theme. Digital product development requires increasing dependency on
technology during the idea generation, designing and development phase (Johnson, D.
2017). Applying digital theme to new product development requires that the newly designed
product should be made with a consumer- centric design that can ensure a positive user
experience (Faems, D., Visser, M., Andries, 2010).

Digital product development also requires creating prototypes that can facilitate test
functionality, validate product idea and gathering immediate user feedback before moving
towards a full- scale development of the product. According to the research of Rothaermel,
F., & Hess, A. (2010) the three digital trends in new product development are as mentioned
below;

2.1. Artificial Intelligence and Machine Learning Integration

Wareham, Fox, & Cano, J. (2014) have identified that application of artificial
intelligence and machine learning is integral to new product development in almost
every industry. These technologies can help the companies in gathering and
analyzing vast data, performing the research work appropriately and while
speculating various aspects of development process bringing innovation to the
design optimization phase.

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2.2. IoT and Smart Connectivity

Figure 2 Success of IoT application in Tesla Vehicles

(Carlier, M., 2021)

Introducing smart connectivity to the product development process is trending in the

manufacturing industries. IoT allows the companies to develop such products that
can monitor their own performance, communicate with other devices and can easily
adapt to the consumer behavior (Weiller, C., Shang, T., Neely, 2015). Smart
connectivity has encouraged opportunities for remote diagnostics, and facilitating in
creating an ecosystem where products can interact with each other and their users
(Abdalslam, 2023).

2.3. Digital Twin Technology

Twin technology is another trend in the product development stage where virtual
replicas of the physical product and system have been created. Dominguez, A. (2018)
have mentioned that digital twin technology is trending because it allows the
companies to simulate and analyze product behaviors in a virtual environment. This
process helps in figuring out the potential issues and challenges, optimizing the

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 overall performance and identifying the maintenance needs (Hedges & Company,
2019).

According to the research of Dominguez, A. (2018) the above- mentioned digital trends in
new product development can enhance the manufacturing process of Tesla and can provide
real-time interaction between the virtual and physical counterparts.

3. Primary Target Market for Tesla

Although Tesla belongs to the category of luxury vehicles but stats have shown that it has
managed to manufacture and deliver approximately 405,300 units in the first quarter of
2022 (Coursera, 2022). The below- mentioned figure has depicted the overall revenue and
net income of Tesla till year 2022;

Figure 3 Target Market for Tesla and Overall revenue generated till 2022

(Coursera, 2022)
To further evaluate that how Tesla has achieved this revenue, we will analyze the target
market of Tesla through the following segmentation criterion;

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3.1. Demographic Segmentation

Figure 4 Tesla owner's income stats

(Coursera, 2022)
According to Ślusarczyk, B., Tvaronaviciene (2020) demographic segmentation of
Tesla comprises of usually male customers with a median age of 54 years and a
sound financial background. Average income of Tesla customer for the entire
households is approximately $143,177 and $128,140 for the Model X and 3
respectively (Abdalslam, 2023).

3.2. Geographic Segmentation

Research has shown that the sale of Tesla vehicles has reached 627,000 units till the
beginning of 2021 which shows a remarkable increase of 16% in over sales
(Ślusarczyk, B., Tvaronaviciene, 2020). Some of the states that own a Tesla include
California, Florida, Colorado and others and have proved US as the biggest consumer
segment for Tesla. The target market includes all those countries that are
environmentally conscious and have more interest in electric mobility (Rothaermel,
F., & Hess, A., 2010).

3.3. Psychographic Segmentation

Psychographic segmentation of Tesla has identified the people who are tech
enthusiast, innovators and early adopters. These segments of customers belong to
those who are living a luxurious lifestyle and are financially sound and are much
concerned about the environmental sustainability.

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4. Impact of Digital Trends on Tesla
Emergence of digital technology in the product development phase has affected the
operations and functionality of Tesla to a larger extent. Being one of the most advanced
technological adapters, tesla has to maintain their image of tech-savvy company and should
make effective strategies that can help them in introducing advanced developments. Here is
a brief detail of how Tesla is impacted by the digital trends in product development process;

4.1. Al and Machine Learning

Tesla is already updating their product development phase through machine learning and
artificial intelligence. To further leverage these advanced technologies, Tesla uses Al to
improvise the autonomous driving feature of their vehicles and entertain their early
adopter’s customer segment more (Abdalslam, 2023). They can use real- time data and can
process it through sensors, cameras and radar system which can enhance the sudden
decision capability of car in intense scenarios. Application of Al- powered predictive
algorithms can help in detecting potential issues in the vehicle so that they can be fixed
before getting more critical. These advanced technological applications can reduce
maintenance costs of the vehicles.

Tesla can add a perfect driving experience for their customers by applying Al and machine
learning in the following way;

 After gathering data about auto-pilot and self- driving features, Tesla can train Al
models to enhance their autonomous driving algorithms
 Tesla has planned to introduce a comprehensive advanced driver assistance system
for their tech-savvy customers (Carlier, M., 2021). Features like cruise control, lane
changing and an updated collision avoidance have added more to convenience while
driving and have supported a smooth and intuitive drive for their consumers
 Al can provide customized preferences for their senior aged vehicle owners like seat
adjustment, entertainment options for more convenience and comfort while driving
 Al has the capability to detect any changes in the driving pattern of the vehicle that
give signals of some technical fault in advance (Dominguez, A., 2018). The proactive
approach of cars can safeguard the vehicles from sudden breakdown and
unnecessary expenses

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  Tesla has applied machine learning to provide smart navigation to their consumers
while driving. The vehicles use real- time traffic data to evaluate the weather
conditions, the best route to follow
 Tesla can introduce the Al powered gesture control that can help the driver in
controlling various functions of car without using buttons and touch screen
 Tesla can also apply Al to give driving training to their vehicle customers where this
technology can give driving suggestions to the drivers through real- time feedback
about their driving skills (Ślusarczyk, B. et al., 2020).

4.2. Digital Twin Technology

Digital twin technology has impacted the product development phase of Tesla motors in
various ways. As indicated by Dominguez, A. (2018) Tesla can use digital twining to simulate
diverse driving conditions and scenarios. Creation of digital twins can help in optimizing
overall performance of their vehicles and provide a premium experience to their consumers.
application of real time data from physical vehicles into digital twins can assist in
streamlining production and eliminating possible defects from the newly manufactured
models (Wareham, J., & Giner, 2014). Tesla can apply these technologies to evaluate the final
performance of their vehicles and analyze their production strategies before
implementation.

Tesla can use digital twin technology to improvise the driving experience of their customers
in the following way;

 Digital twins can help the new drivers by giving them training regarding how to drive
under various driving scenarios. (Ślusarczyk, B. et al., 2020) have further stated that
Tesla can use digital twin technology to enhance their autopilot feature where the
drivers can learn that how their system works under controlled virtual environment.
 Another amazing feature Tesla can offer is virtual driving tests which is possible
through digital twin technology. Now customers can explore and experience Tesla
vehicles virtually without being physically available at the showroom.
 Tesla can bring over the air software updates for their vehicles with the help of digital
twin technology. Now every software update can first be tested over a virtual vehicle
and if the response is positive, the changes can be made to the physical vehicle

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 (Johnson, D., 2017). The potential issues and technical changes can be identified
before they bother the end- user through this technology.
 Digital twin technology can be used by Tesla to create virtual replica for each and
every vehicle. The replicas can be used to test and run various customized options
once the customer is going through the purchase process (Johnson, D., 2017).
Interior configuration, color scheme, and addition of other accessories can be done
on replica and once satisfied customers can add those customized options to their
physical vehicle.

4.3. IoT and Smart Connectivity

Abdalslam. (2023) have clearly defined that how IoT and smart connectivity can help the
company in introducing over- the air software updates. Introducing IoT during the
development process can help developing a connection between tesla vehicles where
vehicles could communicate with each other and infrastructure to ensure safety and road
sense. Remote monitoring of the vehicle and controlling vehicle functionality has also
become possible through IoT application (Dominguez, A., 2018). These advanced
applications can allow the owner of vehicle to monitor the function of their car through their
smartphones easily. Tesla has also introduced customized driving preferences option
through IoT application to their vehicles (Wareham, J., & Giner, 2014).

Tesla can bring the following innovations to their vehicles with the help of IoT and smart
connectivity to leverage advanced improvements to their drive;

 IoT can ensure safety and security of the drivers by using different cameras and
sensors attached to the vehicle. They provide in-time alerts and alarms to identify
any unseen accident or technical breakdowns of vehicle
 Tesla can use smart connectivity technology to offer advanced remote control
features to their consumers. The drivers can set the vehicle functions like lock and
unlock, climate settings and short distance movement with the help of their
smartphine app (Abdalslam, 2023).
 Tesla can decvelop a platform with the help of IoT technology that can connect all
the Tesla customers at one place. This opportunity can help their customers in
discussing their issues with the car and share their experinces and other ownership
aspects with others.

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5. Conclusions
This report has highlighted the application of advanced technological themes to the new
product development process of Tesla and has identified how it can bring a remarkable
experince to their customers. The report has identified how three digital trends in new
product development AI and machine learning integration, IoT and smart connectivity, and
digital twin technology can bring innovative features to their vehicles. Tesla has been
applying Al that assists the company in decision- making and generating new ideas for
product development. Moreover, Al could help Tesla improve its autonomous driving
capabilities by processing real-time data from sensors, and radar systems to make driving
decisions in complex situations. It has been found that Tesla has been making every effort to
make driving more secure for their clients by integrating advanced technologies.

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