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Comment by DenisM | Hacker News Reader

Tesla is a vertically integrated company, so they have squeezed all the margins out of their supply chain. The big automakers all share their supply chain and have to feed it with margins at every level. Same story with SpaceX - vertically integrated.

The whole integrated/shared thing has been going back and forth in different industries at different points in time. Apple has been getting more and more integrated recently whereas earlier wisdom in PC industry was to use shared components.

Musk is betting that it's time to integrate the automotive industriy. If he is right, Tesla will balooon to the size of Apple. The electric part is not the most important here.

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Personally I think Musk doesn't think this way. I think he sees the secondary aspects of Tesla's work on cars (e.g., the battery plants and larger infrastructure of the electric car industry and positioning on standards bodies) as the actual big fish to hunt for.

Tesla cars are nice, but they didn't need to make the entire pipeline. They're doing that because they want to reuse the pipeline and tech in other industries.

I believe Musk means it when he says he wants to wean humanity off of fossil fuels. The big fish you talk about are definitely means to this end and not the goal itself.

That's also true imho. Do note however that gigafactory is also fully integrated, squeezing the margins out of li-ion aupply chain.

> Tesla is a vertically integrated company, so they have squeezed all the margins out of their supply chain. The big automakers all share their supply chain and have to feed it with margins at every level. Same story with SpaceX - vertically integrated.

Vertical integration doesn't guarantee better prices just because you don't rely on third party suppliers. There are other benefits, such as monopolizing a certain part of the supply chain (like batteries in the case of Tesla) but it also requires very high investments (Gigafactory). Those investments can pay off in the future but can also turn out to be very expensive mistakes - you basically wager long term pay offs against flexibility.

Tesla uses the same Tier 1 suppliers as any other automaker, so I don't really see why the Tesla production would be more vertically integrated. They have their own batteries but so do traditional automakers have their own ICEs and other key technologies.

Everyone is missing the point on vertical integration. It's to iterate faster. Even in atoms not bits? Yes!! This is nearly the gigafactory motto, the machine that builds the machine etc.

The suppliers are squeezed really heavily by the traditional auto companies. There is very little margin in the business.

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