Amazon and Tesla’s financial fortunes differ quite considerably. But their success exemplifies the importance of one thing: a long-term vision.
There are some names in business that transcend their industries to become by-words for something else: innovation, revolution, success. Social media was around before Facebook, but the whole concept of it is now epitomised by Zuckerberg’s money-making ad-machine. ‘Hoover’ is just one brand of vacuum cleaner, but its ubiquity in the UK throughout the 20th century saw it become so synonymous with the product that most people just call vacuums hoovers now.
Into this select band of business pioneers, place Amazon and Tesla. Neither needs any introduction. Both, however, have had diverging financial fortunes for some time, with Amazon catapulting to its position as the world’s most profitable company and Tesla, investing heavily in the development of new transport modes and infrastructure, has yet to turn any recognisable profit. Until now.
Predictably, the Wall Street Journal reports today (31st Jan 2020) that Amazon saw blockbuster profits over the holiday season (an 8% increase to $3.3billion). No one is surprised about this. However, Tesla has also reported a profit for 2019, with fourth-quarter profits of around $36million, which analysts put down to the early opening of its new Shanghai factory and the release of a lower-cost Model Y SUV.
And while these figures might seem worlds apart, the corporate strategies that drive them are, perhaps unsurprisingly, quite similar. Amazon’s continued growth is a result of its long-term investment in improving its Prime delivery service. Reliable single-day delivery automatically gives it a huge advantage over its competitors in terms of speed and convenience, and the higher shipping costs charged as a result bring obvious financial benefits to the retail revolutionary.
Tesla, meanwhile, has been building its own long-term vision, one that is just now beginning to bear fruit. Elon Musk, the charismatic founder & CEO, has focussed on growing the company as quickly as possible by making its cars affordable, quick and modern. This raises cash flow and allows the company to continue investing in its products & services, which is why it is now able to target mass adoption of its electric vehicles.
This can only be good for the environment, of course. Tesla’s latest financial results mean it now sits second only to Toyota in terms of market capitalisation. For a long time, Amazon concentrated on growth over income, and on service over profit. Now, it can reap the rewards.
In the automotive industry, you wouldn’t bet against Tesla doing the same.