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Question 1

Readthecasestudybelowandanswerthefollowingquestions:

Tesla'sVerticalIntegrationIsSomethingAutomakersAreEagerToCopy

Automotive manufacturing has largely relied on suppliers in the past severaldecades, though the emergence of software-based electric vehicles has manyglobalauto brands questioningtheage-oldmodel.

Tesla, a pioneering force in the shift, offers a vertically integrated product that ismostly manufactured in-house reducing supply chain needs or dependence onhardwareandsoftwarefromother companies.

As the auto industry shifts toward more in-house manufacturing in a vertically-integrated system like Tesla's, major automakers are facing the need for radicalchangeinhowthey'redoingthings,asdetailedbyNews18inarecentreport.

Tesla uses mostly proprietary technology that the automaker engineers, designsand manufactures itself. This model is far different from automakers such as Fordthat simply bought components off the shelves of their suppliers in years past, inamodelthatTeslaCEOElon Musk oncecalled"catalogengineering."

During a 2020 earnings call, Musk said, "We're designing and building so muchmore of the car than other OEMs who will largely go to the traditional supply baseand[execute] like I callit, catalogengineering."

ThenewscomesjustweeksafterFordofficiallyseparateditsEVbusinessfromitsinternalcombustionenginebusinessdespitedealershipconcernsaboutthemovereported by CNBC. Ford made the move in hopes to generate Tesla-style stockcapitalization,andtofurtherstreamlinethesupplyand productionof EVs.

Ford CEO Jim Farley emphasized the company's need to move away from the"catalogengineering"modelataconferencelastmonth,saying"Themostimportant thing is we vertically integrate." Farley also added that Ford is nowlookingtohavecontroloveritssupplychains"allthewaybacktothemines"wheremineralsfor EVbatteries aremined.

Similar shifts and strategies can be seen in companies like Volkswagen, GeneralMotors and Mercedes-Benz, while most of them are still stuck purchasing electricmotorsfromsuppliersand,insomecases,struggling withsoftwaredevelopment.

Newer EV automaker Lucid Motors also features a more vertically integratedmodel,whichcompanyCEOPeterRawlinsonnotesaidscompanieslikeLucidandTeslain themodernautotechnologyrace.

In an interview, Rawlinson said, "Major players have realized electric vehicles arethefuture,buttheyhaveyettowidelyrecognizethattheyhavetouptheirgameintermsofmotors,transmissions,batterytechnologies,invertersandelectricpowertrains." Rawlinson added, "The electric powertrain cannot be bought off theshelf at a world-class standard, it is not a commodity. This is a technology raceandthemarketdoesn'tsee it yet."

Rawlinson,apreviousvicepresidentofvehicleengineeringatTesla,hasmanagedLucid'smanufacturingprimarilyin-house,inmuchthesamewayasTesladid.Thedaysofautomakersoutsourcingcomponentsandsoftwaremanufacturingtosavemoneyon large-scaleproductioncould soonbeoutdated.

Adaptedfromhttps://insideevs.com/news/580977/tesla-vertical-integration-automakers-copy/Accessedon26^thApril 2022.

1. Identify theinventorychallengesthattheauto industryfaceddueto Covid-19lockdown.

[25marks]

1. Elaboratethefactorsthatpromotetheverticallyintegratedstrategyintheautoindustry.

[25marks]