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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Tesla recently introduced Buy Now, Pay Later (BNPL) payment options in the United States and Canada for items in the Tesla Shop, letting owners pay later for new vehicle accessories.
However, with Tesla app update 4.46, they’re expanding support to a much more critical area — Tesla Service. Qualifying owners in the U.S. and Canada will now be able to use Pay Later options for service performed by Tesla, which includes maintenance or repairs.
Services are provided by Affirm and Klarna, as per Mark Fonte, a Senior Software Engineer working on the Tesla app.
The new feature is seamlessly integrated into the existing service workflow within the Tesla app.
On the Service Estimate, before work on the vehicle begins, you will see a new message on the estimate screen: Pay over time - see if you qualify.
Tapping this link opens the payment calculator, which allows you to view potential payment structures and monthly costs. This provides a clear picture of what a payment plan would look like before you commit to servicing your vehicle.
Additionally, after service is complete and you are ready to pay, the final payment screen will present Affirm and Klarna (region-dependent) as selectable payment methods, alongside the usual options of Tesla Credit or your primary payment card.
Tapping Affirm or Klarna here will reopen the payment calculator, and a confirmation prompt will appear before selecting either BNPL option.
Service Now, Pay Later
Overall, the integration of BNPL providers for service is a thoughtful one for vehicle owners. The terms can vary widely, so it’s important to compare them to other payment options you may have access to. The additional financial flexibility, when faced with a large repair bill, allows more owners to get their vehicle professionally and properly serviced by Tesla.
For those getting larger work done, such as high-voltage battery pack replacements, this is an excellent option to spread payments over a longer period, helping reduce the burden of vehicle repair.
With the launch of Tesla’s Robotaxi Network, we didn't just get a peek into the future of transportation—we got a detailed look at the next version of FSD.
Videos from early access riders revealed some additional capabilities over current public FSD builds, showing off how it handles emergency vehicles and more.
Safety First for First Responders
One of the biggest changes in FSD’s capabilities is its improved handling of emergency vehicles. During a ride in Austin, Robotaxi is seen identifying an approaching ambulance using a combination of visual and audio data, activating its turn signal, and smoothly pulling over to the side of the road to let the ambulance by (video below).
This is a driving task that requires more than simple awareness of laws. It requires reasoning skills to determine where to move the vehicle to create a safe path, as well as the ability to quickly identify an ambulance or another emergency service vehicle with its sirens and lights activated. Understanding the context and executing a safe and predictable maneuver is crucial, as a wrong maneuver could actually make matters worse.
For FSD and Robotaxi to gain both public trust and regulatory approval, this skill is non-negotiable, and Tesla demonstrated its advancements right here. It’s not surprising Tesla added this ability before Robotaxis made it to public roads.
How does a fleet of Robotaxis keep its eyes clean without constant human intervention? Well, a clever new feature that Tesla has previously hinted at in their FSD release notes provides the answer. Robotaxi can now trigger a specific wiper and washer fluid sequence designed to clean the main front-facing cameras.
This might seem like a small detail, but it’s a brilliant solution to one of Tesla’s primary challenges - maintaining sensor clarity. While the vehicle could simply wipe the windshield multiple times, this is a clever solution to clean the most important area of the windshield as thoroughly as possible by focusing extra wiper fluid and wipes on that area.
Complex Maneuvers
Two areas where current builds of FSD V13.2.9 sometimes show hesitation are U-turns and navigating busy parking lots. The latest Robotaxi build appears to improve on both of these areas.
This first video shows a Robotaxi performing a flawless U-turn with no hesitation, and then smoothly switching lanes to take a turn.
Another video on X shows FSD’s updated confidence in navigating a complex parking lot for a precise drop-off. Today’s builds can sometimes struggle in parking lots, being slow and overly cautious when not needed, or too confident elsewhere. This appears to have been improved in these Robotaxi FSD builds with improved path planning and confidence.
Tesla Robotaxi service is just so smooth. Handles parking lots very well, noticeably better than the competitors pic.twitter.com/D5OxSrajCW
We’re also likely to see FSD begin to handle more complex destination options, including parking garages and driveways, which have been promised features for almost a year. The Robotaxi FSD build has also gained the ability to safely pull over on a road, similar to the ambulance example above, but it uses this capability to drop off and pick up passengers. This is a feature that was mentioned in FSD v13.2’s Upcoming Improvements section.
Better Nighttime Performance
Driving at night presents additional challenges, including headlight glare and reduced visibility. The latest version of FSD appears to handle it with almost the same grace as it does during the day. Remember that Tesla’s Robotaxis are available up until midnight. Early access riders mentioned that FSD is far smoother and is a step up from the behavior of current FSD builds.
Impressive nighttime performance from Tesla Robotaxi, dropping us off at In-N-Out as smoothly as it did during the day. pic.twitter.com/yQOhphtR0q
Now, what happens when a passenger feels unsafe or has a critical question? Tesla has placed two key buttons on the rear screen for just those purposes. Users are given control over the ability to Call Support, which almost instantly connects them with a real human agent at Tesla’s Robotaxi Operations Center via video call.
Here’s what happens when you hit the support button in Tesla’s Robotaxi’s.
While it isn’t a fundamental driving feature, it does mean that Tesla’s team can provide support to Robotaxi vehicles remotely, like issuing directive commands to have a vehicle proceed straight, rather than attempting to turn through a gated community.
The other option, Pull Over, allows a rider to immediately request the vehicle to safely pull over, which it will do when it can find a safe and open location. At this point, you can either continue your trip or get out of the Robotaxi.
Both options prompt you with an “Are You Sure?” button before letting you continue, which means you won’t have your Robotaxi ride come to an abrupt stop if you tap the ‘Pull Over’ button by accident.
What This Means for Tesla Owners
These features are likely to be included in future FSD builds. This is essentially the new benchmark by which to judge FSD, at least once it begins rolling out to customer vehicles.
Many of the core driving improvements, such as the more confident maneuvering and emergency vehicle response, will make their way to the wider fleet in upcoming FSD updates.
Remember - Robotaxi isn’t just a service, it is also a preview of Tesla’s driverless FSD builds.
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