Because it is true. Tesla does NOT “manufacture” batteries. Nor do they “design” batteries. Nor are they involved in the nitty-gritty battery fundamental research. They take existing batteries (made by someone else using current technology) and then package them into a useful “module” that is used in their cars.
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Most (or maybe all) Tesla batteries are manufactured by Panasonic (Panasonic was an early investor in Tesla, btw). Panasonic is partnering with Toyota as well. GM partnered with LG. VW created its own battery company.
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I realize your desire to be seen as witty but it seems you are purposefully trying to avoid the points being made.
The point is that both BYD and Tesla have experience designing and producing batteries. VW does not. Even Toyota has more experience than VW with designing batteries.
Not in the context of what differentiates a Model 3 from a Nissan Leaf from the VW id4. Do you seriously believe the major difference between these vehicles is the electric motor?
Are you seriously arguing that Apple is not more vertically integrated than most companies?
Tesla is a major designer and developer of batteries. Tesla holds a number of battery patents. One example:
Tesla no doubt learned much from its partnership with Panasonic at the Nevada Gigafactory. Tesla has since built Gigafactories in Austin and Germany that are ramping up production of the next generation 4680 battery cells and packs. Meanwhile, Tesla’s Fremont plant is approaching a 4680 cell production rate of 1M/week.
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That might have been true at one time but Musk has told all the battery makers that Tesla will buy all the batteries they wish/can sell them… Tesla had stopped selling PowerWalls without solar installations but has recently reversed that. The thinking is that Tesla just got a new lot of batteries from someone. Sorry I don’t have anything beyond rumors.
The Captain
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Oh certainly. The don’t “make” the iPhone, they design it. Others make it from parts not made by Apple.
They don’t “make” the music that iTunes supplies, they own a portal that lets consumers buy it. They own the drawbridge, they don’t make the cars that drive across it, see?
They don’t make the movies that you can download, heck, they don’t even “make” the Apple TV box. Like the iPhone, somebody else manufactures it. (They don’t make the Apple Watch or EarBuds, either. Heck, Beats headphones are manufactured in China too, and always have been. They are sourced from manufacturers who are not called “Apple”, assembled by people who are not Apple employees, so other than “design” I’m not sure how “vertical” that is.
Should I continue? Apple does not make card terminals, but makes transactions possible. They have perfected the art of standing between complicated technology made by others and consumers without owning almost anything capital intensive. That’s not “vertical” by any definition I know.
Apple owns stores, which qualify, but their products are available everywhere else, too. By contrast, Amazon produces software, but also owns warehouses and [some] inventory and is working on logistics and cloud. That is vertical integration. Apple is a gatekeeper on everybody else’s toll road, with the exception of the hardware which they also do not manufacture, but is manufactured for them. See the difference?
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This is a stretch, even for a Tesla fanboi.
But I am willing to admit that nobody knows how the industry will develop; crazy things happen over time - look at the history of GE, which started out making lightbulbs. Weirder, Berkshire was a cotton and textile producer. DuPont made explosives. Wells Fargo drove stagecoaches around. Speaking of cars, Toyota started life making automated looms.
It does appear to me that the battery business will be a commodity over time, perhaps quickly. I say that because it always has been, with the exception of a couple of bumps in technology: carbon to alkaline, alkaline to lithium. Perhaps there will be another, but the core competence of automobile companies is in design, styling, marketing, and assembly.
Batteries are a super important part of EV’s, I’ll grant, but long term I think it’s a commodity business. That doesn’t mean some manufacturers won’t have their own, captive suppliers have a long tradition in some industries. But there’s also no big reason why they should: as the battery industry takes shape there will be lots of places to buy them, even to build them to order.
Maybe not today, but within a few years, I’d be willing to bet.
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Goofy is mostly correct, Apple designs a lot but manufactures very little. So in that respect the vertical integration maybe not as high as some think. On the other hand, they design most of the chips in the iPhone (unsure the percentage, but the “important” chips/IP are theirs for sure). The OS and many of the apps are theirs. But the physical stuff, screen from Samsung, camera from Japan, chips made by TSMC or Samsung, assembly by FoxConn, you get the idea.
They are more vertically integrated than most, however. Most android phones use Snapdragon chips from Qualcomm. Samsung tried to do their own Arm processor and kept falling back on out-the-box Arm designs.
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You should probably continue to at least mention the parts of Apple that are vertically integrated. Apple writes its own software. Apple designs its own processors so that the performance of the software is optimized. Apple designs its own display screens and most accessories to optimize performance and power use. When necessary Apple customizes batteries and cables. This is why it is so difficult to repair an Apple device without using an original Apple part. This is all done to create the Apple ecosystem that is unique to Apple and builds brand loyalty.
When it comes to manufacturing, Apple looks for companies that can build their custom designed hardware as specified. If they can’t find one that is satisfactory, they will build it themselves. The most recent example is what they plan to do with the screens for the Apple watch and iPhone in 2024. So Apple will outsource, but only on their terms.
While not everything with Apple is vertically integrated, most of the stuff that allows Apple to optimize the user experience is. Vertical integration is particularly apparent when Apple comes out with a new technology. The iPad was an example.
Perhaps, but not during the upcoming rapid BEV adoption phase when the battle for marketshare will be most intense. During this period, the battery and software will define the winners and losers. The best battery will be in high demand.
I suspect that VW has concluded that once autonomous driving is the norm, the car itself will become a commodity. No one will care much for the features that used to distinguish models and brands, like acceleration, handling, horsepower. Cars will be like PCs not named Mac, made up of common components that make brands virtually indistinguishable. A lot of PC companies disappeared when that occurred. VW is trying to figure out a business plan that works when that happens to the auto industry.
I believe that was my point. This higher level of vertical integration is why Apple has such a loyal customer base and relatively high margins.
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Well that would be entirely different from how the industry has operated for 120 years, how the home appliance industry works, how home construction works, how fashion works, how most anything that is brand distinguished by “style” works, so I have to say it’s just a terrible prediction.
All cars are going to look the same, but people will buy them because of their batteries? That’s got to rank right up there with “any color you want, as long as it’s black.”
Other than “software”, it’s about the only thing. You must be using a different definition of “vertical integration.” Here’s what it is:
Apple has a couple things, but for the vast majority of their products they produce remarkably little. Henry Ford’s Rouge plant was the apotheosis of vertical integration, controlling every step of production from raw materials to finished product. Ore smelted, glass refined, beams stamped, radiators created, cables manufactured, engine casings cast, tires created, literally everything that made the car made in the plant. Apple is so far removed from that model it’s hard to see, with the possible exception of “software” and “chip design”. (They don’t actually produce the chips.) They’re going to make screens for the watch? Yippee.
Your surmise. Mine: not going to happen in that way at all. Style and design win out, as usual.
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A piece I read recently suggested the plan is, with the car driving itself, the occupants will have more time to interact with the screens that are sprouting in cars like cup holders did 30 years ago. With more screen interaction comes more chances to show them advertising and data mine them, for which the OEM gets a cut.
Steve
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I am just trying to make sense of what VW is doing and extrapolating their reasoning. Let’s just go through a few of their recent announcements.
- 60% reduction of models across the VW group.
- A single EV platform (Scalable Systems Platform-SSP) for the entire VW group by 2026.
- Licensing of the platform to competitors.
- Establishing the Platform Business division to help competitors build EVs
- Establish the Power Co division to develop EV battery production and become a global battery supplier. Six battery cell production plants are planned.
To recap, VW proposes much fewer product choices (and what remains will be more similar to each other), is promoting the transfer of its BEV technology to rivals, and is making a major investment in battery development and production.
Sure sounds like VW is changing its traditional way of doing business.
The definition I’m using is consistent with that of the Wharton Business School faculty, which is good enough for me. Here is their description of Apple:
Vertical integration dictates that one company controls the end product as well as its component parts. In technology, Apple for 35 years has championed a vertical model, which features an integrated hardware and software approach. For instance, the iPhone and iPad have hardware and software designed by Apple, which also designed its own processors for the devices. This integration has allowed Apple to set the pace for mobile computing. https://knowledge.wharton.upenn.edu/article/vertical-integration-works-for-apple-but-it-wont-for-everyone/
If correct then the traditional automakers will definitely have to change their business model. They will need to make vehicles with a focus more on connectivity than driving performance. Currently, Tesla has a huge lead in connectivity in mass produced BEVs.
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The CFO’s comments a year ago, that VAG does not care about volume, and is only interested in pushing ATP and GP up, squares with their licensing out their technology: the revenue they get from licensing helps amortize development costs, in the face of their own volume falling.
Automakers are already changing their business model, with the push to make features built in to a car only usable with the payment of a monthly subscription fee.
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With some notable exceptions! 
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Well, that’s one vision of the future, EV batteries as commodities that are widely available from many sources to whoever wants them.
For another POV, in a remarkable bit of timing just published online is the announcement that VW will be investing in mining companies as part of the plan to become a “global battery supplier”.
VW’s head of technology stated: “In future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,”
In this future envision by VW, a limited number of EV battery providers will essentially control the BEV industry.
In the 1960’s Dustin Hoffman learned that the key word for the future was “plastics”. Today it just might be “batteries”.
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Three years from now, as VW divests this segment, the press release will say:
“We now realize we have no special expertise in this field, we are an automobile company first, we were stupid to sink billions into it, and we will buy our batteries from the lowest cost vendors from now on.”
See: AT&T and Warner Media, Verizon and AOL/Yahoo/etc. Not core. But I’ll admit, nicely vertically integrated 
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Agreed! People seem to think that an automotive purchase is a rational, utilitarian purchase. There is a lot of emotion in a car purchase decision, including the outward appearance of said car purchase. Plus, not everyone wants a car that looks like all their neighbors cars. As a friend told me 30 years ago, people don’t buy Ferraris because of their value, they buy them because oyu can’t.
To me there is an awful disconnect between the Tesla bulls and reality of car ownership.
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Could be. On the other hand you might be misled by nostalgia for an era that will soon be passing. I can see being emotional about a car when it is something you drive. Not so much when the car is driving itself. How emotional do people get about buses or airplanes or ubers or any other vehicle that is being driven by someone else?
When cars drive themselves, consumers are going to want maximum interior space for comfort. This means cars will tend to look the same. They will also want maximum range and the shortest recharge time, which is all about the battery. So yes, autonomous BEVs from different brands will eventually be similar in looks and consumers will choose between them based on who has the better battery.
That I think is why VW is moving to a single common EV platform and investing so heavily in batteries.
People buy Ferraris because they want to drive it and be seen driving it. There is no glory being a passenger in a Ferrari. When Ferraris drive themselves there really won’t be much point to own one. The under-endowed will have to find some other way to compensate.
I’m not sure that’s really due to the vehicle being driven by someone else more than its the fact that the vehicle is owned by someone else. Rich people love their yachts and private planes and Rolls Royces, even though they have staff to drive them for them. And they care a lot about what those vehicles look like, both inside and out.
People don’t buy Ferraris just because they want to drive it and be seen driving it. They want to be seen owning it. Perhaps even more than to be seen driving it. The whole point of an expensive car is to signal that you can afford the expensive car. And that will be no less true when the car can drive itself. As bjurasz noted, the point is to show off that you own it. There’s no more glory to driving a borrowed or rented Ferrari than being a passenger in one.
If we’re in a world with self-driving cars that are still under private ownership (not Mobility as a Service), then there’s still going to be a vibrant and diverse market for lots of different vehicles. Still quite a role for design, durability, quality of interior appointments (perhaps even more so), fit and finish, and the like. Perhaps even more so than today, especially for interior design. In a MaaS world, vehicles might indeed be dominated by spartan generi-boxes. In a world where people still own their own cars, they’re going to want those cars to be distinctive to their own tastes.
Tesla’s in kind of a weird, liminal space between those two scenarios. Musk keeps talking as if a Tesla network is going to be a thing - which seems just bonkers, though he probably has to keep pretending it’s going to happen so they can keep the FSD take rate up. But they’re also talking about making a purpose-built robotaxi model. That makes more sense for a MaaS world - but you don’t need to make and sell 20 million Model 3’s and Y’s and especially Model 2’s if we’re genuinely moving to a MaaS world.
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Why? That not true of houses, where people want maximum interior space and comfort. It’s not true of RVs or private jets. It’s not true of shoes either
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Unlike houses autonomous BEVs have to move and unlike RVs and jets they have to be mass market affordable. It is possible I suppose that autonomous BEVs will become fashion accessories like shoes, but I doubt it. I think they will become more like golf carts and appliances, with the emphasis shifting to utility and comfort rather than style.
Boomers are cute in how lost in the past they are, but the status symbol these days is the cell phone, not the car.
> Phones are now the dominant technology with which young people, and urban youth in particular, now define themselves.
Now that may all change if the car becomes more like a cell phone or a computer, but then we are talking about a very different kind of auto industry where the emphasis is on software, not horsepower.