Tesla's vertical integration and efficiency show why they're the leader in EVs

By Gabe Rodriguez Morrison
Tesla's vertical integration and its competitors
Tesla's vertical integration and its competitors
Not a Tesla App

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.

Tesla Advances with 5G: A Future of Enhanced Connectivity for Cars and Robotics

By Kevin Armstrong
Tesla building 5G private network
Tesla building 5G private network

Tesla appears to be planning an ambitious project to build a private 5G network. This initiative would revolutionize connectivity for its vehicles and the robot, Optimus, as well as any other plans the company is likely to develop in the future.

Innovative Job Posting Reveals Big Plans

Although now removed, a recently spotted job posting for a Cellular Systems Integration Engineer on Tesla's career page shed light on the company's intentions. The role demands expertise to elevate Tesla's vehicle and Optimus robot connectivity, promising to push the boundaries of low latency and high data rates.

Tesla's journey from 3G to the anticipated 5G upgrade will bring about ultra-reliable communication and high-speed data transfer, crucial for over-the-air software updates, autonomous driving features, and real-time data analytics.

The Strategic Role of Private 5G Networks

Deploying its private 5G network, Tesla aims to create a seamlessly connected environment in its manufacturing facilities, research labs, and outdoor spaces. This infrastructure is not just about enhancing vehicle connectivity; it's also pivotal for the operational efficiency of the Optimus robot in various scenarios, including warehouse operations.

Tesla's foray into private 5G networking places it in an advantageous position in the automotive and tech industries. This strategic move aligns with the global trend towards adopting private 5G networks, which promise to revolutionize industries with their reliability and speed. Tesla's efforts to develop a private 5G protocol stack that integrates with any cellular infrastructure globally will set new industry standards.

With 5G, Tesla vehicles and Optimus robots will benefit from significantly reduced latency, offering under 5 milliseconds compared to the 60-98 milliseconds of 4G networks. This technological advancement is expected to enhance the functionality and responsiveness of Tesla's products, paving the way for advanced autonomous driving capabilities and efficient robot operations.

Conclusion

Tesla's interest in developing a private 5G network is a logical step. By building an infrastructure that supports the fastest connectivity standards, Tesla is preparing for its vehicles and laying the groundwork for sophisticated robotics applications. This endeavor reflects Tesla's ongoing commitment to innovation and its role in shaping the future of transportation and automation.

Tesla Is in Talks To Produce Electric Vans in Italy According to Report

By Kevin Armstrong
Van rendering
Van rendering

Italy has been discussing with Tesla about potentially establishing a factory producing electric trucks and vans. This information came to light in an Italian media outlet, Il Sole 24 Ore, which reported that the Ministry of Business and Made in Italy (Mimit) spearheaded talks to secure Tesla's investment.

Tesla and Italy: A Strategic Dialogue

Since last summer, Italy has broadened its industrial horizons by engaging in talks with Tesla, alongside negotiations with prominent Chinese manufacturers such as BYD, Great Wall Motors, and Chery Automobile. Notably, the discussions with Tesla have centered around producing electric commercial vehicles, highlighting a departure from conventional car manufacturing and reflecting the evolving demands of the global market.

Under the leadership of Minister Adolfo Urso, Italy aims to invigorate its automotive sector by encouraging the presence of multiple manufacturers. This approach is designed to stabilize the national components sector, which faces challenges due to the shift towards electric vehicles. Italy aims to produce 1.3 million vehicles annually, including a significant contribution from a new yet-to-be-determined manufacturer.

A Geopolitical and Industrial Balancing Act

Italy's engagement with Tesla occurs amidst a delicate phase of negotiations with Stellantis for increased vehicle production within the country. This strategic dialogue with Tesla, alongside discussions with Chinese competitors, is a pivotal element in Italy's industrial and geopolitical maneuvering.

A multipurpose van is the next logical step for Tesla to produce once the less expensive next-gen platform is released (code name Redwood). However, engineers seem to be busy perfecting the next-gen Roadster, and the van has had little discussion. Given the company's leaks, if a van were in the works, you would think we would’ve heard about it. Perhaps this is the nudge Tesla needs to get the van into production.

As Italy endeavors to become a key player in the electric vehicle industry, its negotiations with Tesla signify a promising development. The possibility of Tesla establishing a facility for electric trucks and vans in Italy underscores the country's commitment to sustainable transportation and positions Italy as an attractive destination for automotive innovation.

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