OEM Vertical Integration

Category: infrastructure

The extent to which an automaker controls its own supply chain, from raw material sourcing and battery refining to final vehicle assembly.

In the new era of EV competition, brands like Tesla are highly vertically integrated (owning the mines and battery plants), while traditional OEMs often rely on thousands of outsourced tier-1 and tier-2 suppliers. Vertical integration increases control and margin, but adds massive capital intensity.

Common Examples

• OEM vertical integration is the automaker’s hedge against supply chain volatility, allowing them to internalize battery production instead of buying from third-party vendors.
• Increasing OEM vertical integration requires multi-billion dollar infrastructure investment into manufacturing zones that traditional automakers are only just now beginning to pivot toward.