Photo: GreenTheOnly/Twitter
Tesla investors and fans will tell you that verticalization is one of Tesla’s main competitive advantages. By developing its own components, it can improve them at will. By selling its EVs directly to customers, Tesla cuts the middlemen. By having its own charging network, it does not rely on third parties. It all sounds sweet, but the current state of affairs shows these elements may actually be a handicap. Verticalization cuts crucial control layers from the industrial process.
The most obvious disadvantage of centralization is that anything wrong is always Tesla’s fault. If Tesla Service Centers do something wrong while repairing a car, it is the EV maker that does it. Any issue at a Supercharging station has Tesla’s fingertips all over it. If there are problems with the delivery of a vehicle, guess who will have to solve them? Precisely. But there is more.
As much as some people hate negotiating with dealers, they are carmakers’ first customers. In other words, dealerships need to buy the vehicles they will resell to final clients. This is the excuse they use for markups: if they own the cars, they can sell them for any price they want.
If these vehicles come with any defects, dealerships can refuse to get delivery. After all, who would buy a car that comes without brake pads, with misaligned doors, dirty or damaged interiors, mismatching paint, and other similar problems? These are pretty common situations with Tesla EVs.
In Facebook groups and forums, buyers often discuss if they will accept delivery of one of these EVs without a careful pre-inspection. There are even tutorials for people to avoid the most common issues Tesla vehicles present. Some dealerships may deliver faulty cars from the factory or damage them after receiving them, but businesses willing to prosper will not do so. They know the customer is king, and happy ones will come back more than once.
Being different companies from the automaker, dealerships also tend to be vocal about the problems the vehicles may present. They want to sell the best cars in the market to be as competitive as possible. If they notice that they are arriving with serious issues, they will sound an alarm.
On the other hand, Tesla Service Centers are company branches. If the EV maker’s priority is to deliver as many vehicles as possible, it will dismiss any complaints to keep pushing them to customers. Better saying, “it will” is the wrong verbal tense: it already does that and has been doing it for quite a while. Their favorite excuse is that the EVs are “within specs.”
In their role of repairing cars, dealerships may also work as an important control instance. If they get components from a supplier and these parts are defective, technicians will demand new ones. If these components come from the manufacturer itself and these technicians work for this carmaker, they will either try to warn the company, become whistleblowers, or just quietly fit these defective parts into the vehicles, waiting to see them again soon.
Imagine if Tesla bought its heat pumps from a supplier, and they started to fail in the winter as the ones made by Tesla do. The EV maker would have probably ordered the supplier to fix them and to help replace them in all cars with faulty components. The problem is that Tesla made these heat pumps and did not test them enough. When they started breaking down in freezing temperatures, the company just said an over-the-air (OTA) update would solve the situation. It didn’t; we should hear about new cases this winter.
Another problem with developing parts on your own is that you may not respect industrial timing. Tesla is a good example: it changes its car at will. A vehicle made this month is different from one made last month and will also be different from future EVs. Buyers never know what to expect.
When you order parts from a supplier, you will do so based on production expectations, with a certain number of components you commit to purchasing during a given time. That is what leads to model year specifications and predictability. If you have a contract to respect, you will produce the number of cars you have anticipated before making changes and buying different components.
If the cars change without notice, people may grow afraid of buying a certain model. Will it have a heated steering wheel? An automated frunk? The computer needed for autonomous driving, will they ever deliver that feature? Tesla owners often say they should have waited a little longer to get the latest tech. The company could have the discipline only to make scheduled improvements, but the lack of model years in Tesla vehicles shows the EV maker does not care about that.
Another advantage of regular suppliers is that they could tell you if these parts are up to your specifications or if you will need them to be more robust (and probably more expensive). Without that sort of interaction, all you have is your own engineering team. If it fails, you have no safety net to prevent issues.
With Tesla and its pressure to sell as many cars as possible, there is another problem, reported at Giga Shanghai. According to PingWest, when Tesla’s few suppliers deliver components that do not match the EV maker’s requirements, the company just fits them into the vehicles to deliver them as soon as possible. A supplier representative said they send Tesla whatever they have because the EV maker keeps asking them to speed up production. That may happen in all Tesla plants.
Ultimately, verticalization at Tesla is evidently more of a handicap than an advantage. It does not help the company improve its products or services. On the contrary: they tend to present more flaws precisely because the EV maker thinks it can handle everything on its own.
The surprising bit is that Tesla has actively wanted it to be like this. The more verticalized things are, the less transparent they become. Considering the automaker shut down its press relations department, it should come as no surprise. Too bad that customers learn about the impacts the hard way: when they hit them.
As much as some people hate negotiating with dealers, they are carmakers’ first customers. In other words, dealerships need to buy the vehicles they will resell to final clients. This is the excuse they use for markups: if they own the cars, they can sell them for any price they want.
If these vehicles come with any defects, dealerships can refuse to get delivery. After all, who would buy a car that comes without brake pads, with misaligned doors, dirty or damaged interiors, mismatching paint, and other similar problems? These are pretty common situations with Tesla EVs.
In Facebook groups and forums, buyers often discuss if they will accept delivery of one of these EVs without a careful pre-inspection. There are even tutorials for people to avoid the most common issues Tesla vehicles present. Some dealerships may deliver faulty cars from the factory or damage them after receiving them, but businesses willing to prosper will not do so. They know the customer is king, and happy ones will come back more than once.
Being different companies from the automaker, dealerships also tend to be vocal about the problems the vehicles may present. They want to sell the best cars in the market to be as competitive as possible. If they notice that they are arriving with serious issues, they will sound an alarm.
On the other hand, Tesla Service Centers are company branches. If the EV maker’s priority is to deliver as many vehicles as possible, it will dismiss any complaints to keep pushing them to customers. Better saying, “it will” is the wrong verbal tense: it already does that and has been doing it for quite a while. Their favorite excuse is that the EVs are “within specs.”
In their role of repairing cars, dealerships may also work as an important control instance. If they get components from a supplier and these parts are defective, technicians will demand new ones. If these components come from the manufacturer itself and these technicians work for this carmaker, they will either try to warn the company, become whistleblowers, or just quietly fit these defective parts into the vehicles, waiting to see them again soon.
Imagine if Tesla bought its heat pumps from a supplier, and they started to fail in the winter as the ones made by Tesla do. The EV maker would have probably ordered the supplier to fix them and to help replace them in all cars with faulty components. The problem is that Tesla made these heat pumps and did not test them enough. When they started breaking down in freezing temperatures, the company just said an over-the-air (OTA) update would solve the situation. It didn’t; we should hear about new cases this winter.
Another problem with developing parts on your own is that you may not respect industrial timing. Tesla is a good example: it changes its car at will. A vehicle made this month is different from one made last month and will also be different from future EVs. Buyers never know what to expect.
When you order parts from a supplier, you will do so based on production expectations, with a certain number of components you commit to purchasing during a given time. That is what leads to model year specifications and predictability. If you have a contract to respect, you will produce the number of cars you have anticipated before making changes and buying different components.
If the cars change without notice, people may grow afraid of buying a certain model. Will it have a heated steering wheel? An automated frunk? The computer needed for autonomous driving, will they ever deliver that feature? Tesla owners often say they should have waited a little longer to get the latest tech. The company could have the discipline only to make scheduled improvements, but the lack of model years in Tesla vehicles shows the EV maker does not care about that.
Another advantage of regular suppliers is that they could tell you if these parts are up to your specifications or if you will need them to be more robust (and probably more expensive). Without that sort of interaction, all you have is your own engineering team. If it fails, you have no safety net to prevent issues.
With Tesla and its pressure to sell as many cars as possible, there is another problem, reported at Giga Shanghai. According to PingWest, when Tesla’s few suppliers deliver components that do not match the EV maker’s requirements, the company just fits them into the vehicles to deliver them as soon as possible. A supplier representative said they send Tesla whatever they have because the EV maker keeps asking them to speed up production. That may happen in all Tesla plants.
Ultimately, verticalization at Tesla is evidently more of a handicap than an advantage. It does not help the company improve its products or services. On the contrary: they tend to present more flaws precisely because the EV maker thinks it can handle everything on its own.
The surprising bit is that Tesla has actively wanted it to be like this. The more verticalized things are, the less transparent they become. Considering the automaker shut down its press relations department, it should come as no surprise. Too bad that customers learn about the impacts the hard way: when they hit them.
Google News