Figure he’d ever pivot and become a net cell producer to others?

I think he intends for Tesla to be the end use for all the cells. Unless their products start tanking, in which case he'll pivot.

I could see them supplying cells for stationary energy storage if Tesla energy is at capacity, but I suspect they would only become a cell supplier to another auto manufacturer if that manufacturer was serious about EVs and willing to commit to a long term contract.

That must be what he’s thinking. He’s said he sees a need for 100 gigafactories to get us onto sustainable energy.

Sure, but batteries are far more 'core' to Tesla's businesses than trucking or car carriers. TBH, I never understood that comment by him. I imagine he got interviewed right after some Tesla operations meeting where they were struggling to find trucking capacity and he just blurted out 'lets build car carriers' to the nearest microphone.

>Sure, but batteries are far more 'core' to Tesla's businesses than trucking or car carriers.

That's true, but I'm not sure it makes any more sense than car carriers. The cells that Tesla users for their battery packs are commodity products. Why would you bother to try to manufacture those? I mean, batteries are core to Apple's business too, but they aren't producing them.

The value-add is in their pack technology. The move back to vertical integration is odd.

>The cells that Tesla users for their battery packs are commodity products

Not in the volumes Tesla will require over the next decade. I have a hunch that every EV manufacturer that tries to get serious about volume production (> 1 million vehicles per year, say) will hit a brick wall of supply shortage. There either won't be enough cell production capacity available, or competing manufacturers will bid it up enough to seriously impact the profitability of the vehicles.

Until EVs are established as the obviously best alternative for most vehicles, global production capacity will lag to the degree that in-house battery cell production is a necessary strategic advantage.

Add that to the fact that the ~90% efficiency of electric drivetrains makes single-digit improvements in component properties hugely impactful on the economics of the final product, and battery cells seems like something that should mainly not be outsourced.

If the cells are truly a commodity, the only thing in-sourcing gets you in terms of profit is the opportunity to beat the market on demand prediction (that is, you may over-spend on production and not actually benefit from your capacity predictions).

There's a similar effect with the component properties. Really, you are looking at the properties per dollar spent, so if you take a wrong term, in-sourcing costs you relative to the market.

Tesla have shown a rather large appetite for vertical integration. For example, they make their own seats. Why? I guess they think they can eek out some advantage. They could certainly get commodity seats from a traditional auto supplier, but they must have some line-of-sight to making them cheaper, or better or maybe just more customized than what a supplier would produce.

I think the same will be true for batteries. They won't be making a copy of the Panasonic cell design. They will only become a manufacturer if there is some advantage to be gained. They will probably seek to integrate IP from their Maxwell acquisition and improvements from their research group in Canada.

>They could certainly get commodity seats from a traditional auto supplier, but they must have some line-of-sight to making them cheaper, or better or maybe just more customized than what a supplier would produce.

That's what they think. What do you think? Do you think it's possible for a single player to be the best builder in everything?

When it comes to manufacturing, the world is flattening out. You can produce things from components built and sourced all over the world. But Tesla is going in the other direction. One has to at least question their reasoning, and not assume "Elon knows best".

Personally I’m rooting for Tesla’s vertical integration approach. Tesla doesn’t need to be the best, just good enough to make a component of adequate quality for less than what the supplier would charge for it. I do think they’ve figured out some places where they can get to that level.

For commodities like semiconductors it would be insane to try and open your own fab: those players are so much more sophisticated than anyone else. For mechanical components I think they logic is a lot more complicated. In a phrase: it depends. I’ve been working in product development for a few years and have been to overseas factories to help set up assembly lines. Some suppliers are fantastic and we won’t beat the quality / price. Others just don’t seem to get it and we’ll spend months and many engineering hours basically teaching them how to build what we need. It’s those cases where I would personally prefer to be more vertically integrated.

> They also bought a trucking company and said they were going to start building their own car carriers

Surely once they actually have full self driving nailed the cars will just deliver themselves. It's just a question of where in the 1-20 years away that is.