Supply chain issues brought on by the pandemic have been particularly challenging for the automotive sector. A global chip shortage among an onslaught of supply chain obstacles have adversely affected the entire industry. Tesla's vertically integrated strategy proved to be very advantageous when facing these supply chain challenges.
Tesla's insistence on vertical integration used to be one of the main reasons the company struggled to become profitable and reach volume production. Now, it has allowed the company to scale rapidly while the broader automotive industry is down amidst a supply chain disaster.
The conventional automotive business model has traditionally concentrated on design and final assembly while largely outsourcing to suppliers. This strategy left them extremely vulnerable to supply chain turmoil.
In the past, automakers outsourced as much as possible and mainly focused on supply chain management. In the short term, this strategy reduced production costs but in the long term, legacy automakers lost the ability to adapt, innovate and advance technology.
Automotive manufacturing has typically relied on third party suppliers which has led to supply chain contingency and reliance on external companies. This business model has been successful for a long time due to the maturity of the internal combustion engine and a lack of need for innovation.
Tesla recognized the stagnant supply chain of the automotive industry and revolutionized it by adopting a vertically integrated strategy.
Tesla is a chain of startups
- Elon Musk
In recent years, Tesla has defied the conventional business model, reducing supply chain needs and reliance on other companies.
Tesla has vertically integrated many production steps, from battery production to electric powertrain production and self-driving software. According to Tesla CEO Elon Musk, Tesla is a "chain of startups."
This strategy allowed Tesla to avoid shortages of batteries, which have hindered legacy automakers from reaching volume production of electric cars. Before legacy automakers began investing in electric vehicle manufacturing, Tesla partnered with Panasonic to build its first gigafactory to produce batteries. Now, the gigafactory ensures a reliable supply of batteries.
Lucid Motors, a newer EV automaker, has also adopted a more vertically integrated business model. CEO Peter Rawlinson says that gives them a huge advantage in the modern EV technology race.
In an interview, Rawlinson stated, “The electric powertrain cannot be bought off the shelf at a world-class standard, it is not a commodity. This is a technology race and the market doesn’t see it yet."
Tesla's in-house software development is perhaps their biggest advantage over its competitors. As a Silicon Valley born company, Tesla has never outsourced their software. They have instead developed a proprietary self-driving software that is improved by collecting data from Tesla's network of over one million beta testers.
Ford CEO Jim Farley emphasized the company's need to move away from the “catalog engineering” business model at a conference earlier this year, saying "The most important thing is we vertically integrate."
Tesla is potentially going a step further to vertically integrate their supply chain. In light of the skyrocketing prices of lithium, Tesla may plan to get into the lithium mining and refining business. Tesla is considering mining some of its own raw materials for the same reasons that they developed their own batteries, produced their own electric motors and built their own computer chip and software for autonomous driving.
Tesla's pace of innovation and lead in the industry has become clear as the traditional business model of outsourcing components and software to cut production costs is quickly becoming outdated.
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One of Tesla’s greatest weaknesses, as it has quickly become one of the world’s most ubiquitous cars on the planet has always been service. Escalating issues to managers and sometimes even reaching a Tesla Service employee can be a total coin flip, depending on your Service Center.
Tesla is continuing its push to integrate AI across its customer support channels in an effort to improve customer service. According to Raj Jegannathan, Tesla’s VP for IT, AI Infrastructure, Apps, Infosecurity, and Vehicle Service Operations (that’s a lot), Tesla is launching a pilot program for a new AI designed to improve customer interactions with Service.
Tesla Service’s new AI Agent detects comms delays, monitors sentiment, & auto-escalates to leaders. Starts tomorrow at 10 pilot locations. In 2 weeks, type “Escalate” in ‘message center’ to reach managers. Guardrails in place to prevent abuse. We’ll keep improving!
At 10 pilot service locations, this new AI agent will begin working behind the scenes at Tesla Service, to help with customer communications. It will provide three key features:
Detect Communications Delays: The AI will actively monitor service interactions to identify potential delays in communication or progress. These are often a key pain point for customers who reach out to Tesla Service and don’t receive a response for several days, as Service has nothing new to add. The AI can now step in and let the customer know Tesla is still waiting on parts or something else.
Monitor Customer Sentiment: By monitoring the tone and content of the messages between the customer and Service agents, Tesla will be able to identify situations where a customer might be dissatisfied or facing difficulties.
Auto-Escalate: If either a communications delay or negative sentiment is detected, the AI can automatically escalate issues to human managers for review. This helps to address problems before customers need to seek escalation themselves or become upset about an issue.
Customer Escalation Requests
Alongside the new AI tool, Tesla is also introducing a more direct way for customers to get higher-level attention. According to Tesla, within the next two weeks, customers can simply type “Escalate” in order to have their issue routed directly to management.
Raj’s team is currently working on implementing guardrails to prevent abuse, but this will soon make its way to improving Tesla’s service offerings. We’re glad to see Tesla taking steps to identify and correct deficiencies in the process - it has always been a sore tooth for Tesla in the last few years.
Over at 7000 Santa Monica Boulevard in Hollywood, Los Angeles, Tesla’s stainless steel-clad retro diner is really coming together. Most recently, we saw the gigantic 45-foot LED screens for the outdoor theater come to life, but there’s been more going on inside than we originally knew about.
Now, thanks to photos shared with us by Thomas Adamian, who ventured over to the site, we have our very first look inside the nearly completed Tesla Diner.
While we knew the concept aimed for a retro-futuristic theme, blending a diner with Superchargers and a modern open-air theater, the initial stages of the interior are well beyond a mere nostalgia project.
Interior Explored
Inside, we’ve got a seamless blend of classic circular diner-style seating accompanied by distinctly modern lighting and fixtures. This definitely brings to life that modernist art-deco feel and feels right at home alongside Tesla’s Robovan, rather than a period set-piece.
The facility is still clearly under active construction in these images, with materials and equipment visible, but they provide the best and most detailed glimpse so far of what the indoor dining experience will look like.
Front Door / Diner Logo
The circular spaceship-like entrance
Thomas Adamian
The circular entrance looks like something out of this world - and while we’re hoping the doors slide inside the walls, like a pocket door, they likely open in or out like a standard door.
This is also one of our first looks at the Tesla Diner sign, which hangs inside the doorway. The logo itself also has an art-deco look and feel. On the door, there’s also a sign confirming that the diner will be open 24/7.
Windows & Artwork
Shutters, Stealth Fighters, and Cybertrucks
Thomas Adamian
Tesla really nailed the style with the windows and shutters, matching the diner’s vibe. In the background, you can also see the concept art for the Cybertruck. We hope Tesla includes artwork for other vehicles as well, as they help tell the Tesla story and give diners an inside look at the company.
Exterior Seating
The exterior seating
Thomas Adamian
There’s also an exterior seating space, which seems to be in the early phases of being laid out. None of those pallets have been disassembled yet, but they likely have outdoor furniture, letting customers sit outside and enjoy a meal.
The Tesla Diner in Hollywood is shaping up to be much more than just a restaurant with chargers. It’ll have in-app functionality with the Tesla app and offer room for 200 diners inside, along with the ability to use a drive-in theater with in-car service. Tesla’s original plans also include rooftop seating, so there’s likely more to come once the construction phase continues.
The idea for a Tesla Diner began in 2023, when it was announced at Tesla’s Investor Day. While the diner has yet to open, it already seems like it’ll be an iconic establishment for the area. Amid recent brand turbulence tied to politics, this project has the potential to refresh Tesla’s image—offering a fun, memorable place to charge.
If there’s one thing we’re hoping for, it’s that the food matches the creativity of the design. Ideally, what Tesla is building in Hollywood becomes a blueprint for similar diners across North America—and eventually, the world.
With its unique concept and prime location, the Diner is poised to become a true LA landmark and a must-visit destination for locals and tourists alike.
![Exclusive: A Look Inside the Tesla Diner [PHOTOS]](https://www.notateslaapp.com/img/containers/article_images/2025/diner-seats.jpg/b0b4cb51b80d1f29298c9ca6b9ad2ae8/diner-seats.jpg)
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