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

August 1, 2022

By Gabe Rodriguez Morrison

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.

Norway Approves Tesla’s FSD Testing on Public Roads; Potential for Europe-Wide Deployment

April 26, 2025

By Karan Singh

Not a Tesla App

According to filings found by Kees Roelandschap on X, Tesla has obtained a 2-year exemption from UNECE autonomy regulations to run FSD Supervised on public roads in Norway. This marks one of the first positive developments for regulations and autonomy in Europe — great news for European customers.

Previously, European transportation agencies stressed additional caution and requested more time to legislate, further delaying the widespread UNECE regulation changes for autonomous vehicles.

Norwegian FSD - Employees Only

Following the recent approval from the Norwegian Road Authority, Tesla will be permitted to use its Supervised vehicles on public roads in a testing capacity. This exemption does not yet apply to customers, so we will have to wait and see how testing progresses.

Tesla will specifically be allowed to run FSD V13 and its derivative builds (meaning AI4 vehicles only) with automated steering and speed controls on EU-registered and approved vehicles.

Tesla will also be required to have Tesla-trained drivers (employees) conduct the testing. There is no specific policy in place that enables the use of FSD for customers at this time. However, as testing is conducted and bureaucratic hurdles are overcome across various transportation departments, Tesla may be able to extend the offer to European customers. According to Tesla’s latest earnings call, the company still plans to release FSD in Europe by the end of the year.

Tesla has already begun testing in the Netherlands, showing off FSD’s capabilities in Amsterdam.

FSD Supervised in Europe, pending regulatory approval pic.twitter.com/PYkcATjSUN
— Tesla Europe & Middle East (@teslaeurope) April 5, 2025

Article 39 Exemption

The UNECE can grant exemptions for innovative technologies that move faster than legislation under Article 39. However, Tesla requires the backing of a national ministry of transport to bring this to the UNECE’s attention. The next round of voting on critical issues is expected on May 12, 2025, which may not leave Tesla much time to present its findings to UNECE.

We don’t expect Tesla to receive authorization immediately. It may take several weeks or months of testing from the Netherlands or Norway teams before one of the two countries is willing to support Tesla’s exemption bid.

However, if Tesla achieves an Article 39 exemption, it could allow Tesla to roll out FSD to customers across Europe, provided there are no country-level exemptions.

Tesla Reintroduces FSD Transfers in North America

April 25, 2025

By Karan Singh

Not a Tesla App

Following customer requests, Tesla has once again returned FSD Transfers for North America. This comes after some new details we received on FSD Supervised and Unsupervised at the recent Q1 2025 Earnings Call.

Vox Populi, Vox Dei … FSD Transfer is back

All countries (in NA), all S3XY + @cybertruck (excl Foundation Series & Launch Series)
— Tesla North America (@tesla_na) April 25, 2025

FSD Transfers

This latest round of FSD transfers doesn’t have a specific time limit - so if you’re in the market for a new vehicle and were worried about transferring FSD from a HW3 vehicle - now is the best chance.

This transfer opportunity is applicable for any new vehicle purchases, including the Model S, 3, X, Y, as well as the Cybertruck. The only vehicles it doesn’t apply to are the Foundation-Series Cybertruck or a Launch-Series Model Y, which already come with FSD included.

If you’re conducting an FSD transfer, you’ll need to reach out to your Tesla delivery coordinator through the Tesla app to confirm you’re eligible and to get the process started.

Note that once you take delivery, FSD access is removed from your older vehicle, regardless if you plan to trade in your vehicle or keep it.

Canada and Mexico

For those in Canada and Mexico, there’s some good news. This opportunity is available for customers in those countries as well, however, new vehicle orders are currently paused in Canada and Mexico for unknown reasons.