- Tesla has always done things in-house and says that’s the secret to his success.
- Today, nascent and mainstream automakers are rushing to emulate Tesla’s vertical integration.
- An ongoing business merger between three companies is just the latest example.
Amid a supply chain crisis that has wreaked havoc on the auto industry for the past two years, one element of Tesla’s business strategy seems particularly prescient.
In an industry heavily reliant on outsourcing and multi-tiered supply chains, automaker Elon Musk is developing much of its own manufacturing machinery, designing its own self-driving software, and planning to ‘bring the production of battery cells internally.
Tesla may one day be the most “deeply integrated” auto company in the world, investment management firm Ark Invest said earlier this year. And its valuation recently exceeded $ 1 trillion.
Now, its competitors appear to be taking a page from Musk’s book and vertically integrating in the pursuit of similar success.
Automakers are increasingly moving to vertically integrate and bring more stuff in-house, said Mike Wall, executive director of automotive analytics at IHS. A common goal, he said, is “a much more fundamental understanding of their supply chain”.
General Motors recently made an initial investment in a lithium production effort, which President Mark Reuss touted as a step towards vertical integration. This continues a model that GM established by starting its own utility vehicle company, called BrightDrop, and a battery operation with LG Chem called Ultium.
The startup EV Lucid Motors is already presenting itself as a vertically integrated company. Rivian CEO RJ Scaringe told TechCrunch that “it’s really essential to control and vertically integrate” key capabilities like software and propulsion technology.
And the trend towards vertical integration is probably behind a merger between three lesser-known global companies.
The Indonesia Battery Corporation, in partnership with Luxembourg investment firm Odin Holdings, is buying StreetScooter, a manufacturer of electric trucks and vans of the Deutsche Post DHL group, a source familiar with the matter said.
The $ 170 million sale is expected to close in the coming weeks.
DPDHL initially purchased StreetScooter in 2014 in order to decarbonize its fleets, but has had mixed success. StreetScooter has more than 20,000 commercial vehicles on the road and a production capacity of 10,000 vehicles per year, but DPDHL decided to stop production of electric vans last year. CEO Frank Appel said in a press release that he had struggled to scale StreetScooter “without the right partner”.
Now DPDHL is selling because it seems to have found the right partner in IBC. In a competitive and capital-intensive auto industry, the deal makes sense for three main reasons.
First, IBC now controls the existing StreetScooter production line, one of the highest upfront costs in electric vehicle manufacturing and a substantial barrier to market entry.
Second, StreetScooter has direct access to IBC’s battery production and mining rights in Indonesia. The supply of nickel there, for example, is essential for electric vehicle batteries.
Finally, he combines the operation of the IBC battery with the engineering expertise of Odin, whose main shareholder is Stefan Krause, CEO of Moov, founder of the startup EV Canoo and former executive of the company EV Faraday Future.
DPDHL will also retain a stake in the company as part of the sale, the source said.
StreetScooter and IBC did not respond to requests for comment on the deal. A Moov spokesperson told Insider the company couldn’t provide details, but “is currently exploring several deals that would allow us to deliver a holistic and unique electrification offering for fleets.”
“It’s a perfect example of vertical integration to emulate Tesla and GM,” said Dan Ives, analyst at Wedbush Securities. “Having access to the raw battery is the golden ticket.”