Elon Musk’s opinion of outsourcing

What is Elon Musk’s opinion of outsourcing?

Elon Musk favors vertical integration over outsourcing for Tesla, arguing that combining engineering and production is more efficient than separating them, though he acknowledges Tesla will still manufacture in China as a major long-term market.

• Musk models Tesla’s battery development on Henry Ford’s vertically integrated approach, aiming to lower production costs at the Gigafactory.
• He has said it is good to combine engineering and production and that separating them is pretty inefficient.
• Despite favoring vertical integration, Musk concedes Tesla will have a factory in China, which he calls always going to be the second-biggest market after the U.S.

Nowhere is global outsourcing more evident and present than in the automotive industry. With cost efficiency gaining top-priority, CEOs are relying on the assured benefits that outsourcing brings, particularly in low-cost, talent-rich, and manufacturing savvy nations like China and India.

Elon Musk finds prospects of vertical integration and Chinese manufacturing promising

However, Elon Musk, one of the most exciting entrepreneurs of our time, is preferring to go the vertical integration route, modeling Tesla’s battery chemistry development after Henry Ford, who owned and operated a variety of industries to produce raw materials for his automotive factories.

Tesla’s Gigafactory expects to manufacture batteries at a scale rivaling that achievable by a global supply chain, which – the company says – will also lower production costs by a significant margin. Tesla CEO Elon Musk has said that it is ‘good to combine engineering and production’, and believes that separating the two at different locations ends up being ‘pretty inefficient’.

For small and medium sized companies, vertical integration is an extremely expensive and time-consuming affair, not to mention a challenging implementation that comes with a ton of legal obligations. The alternative – outsourcing – requires a small initial investment, saves costs and allows businesses to focus on their core daily operations. These time-tested benefits have seen both established and emerging companies seek out offshoring contracts that offer the best combination of cost, quality and convenience.

Inventor and Tesla founder Elon Musk, however, is not writing off the value of manufacturing his company’s electric cars in China. He has admitted that over the long-term, “there’s no question we’ll have a factory in China.” He has also acknowledged that China is “always going to be the second-biggest market after the U.S.”

Business leaders and opinions on outsourcing

See what other business titans, and world-leading businesses, think about outsourcing – we’ve written an article summarising the thoughts of Warren Buffet, Elon Musk, Rupert Murdoch, Nike, and more… read it now.

Comprehensive list of outsourcing quotes

We have compiled the most comprehensive list of outsourcing business quotes. Some of the most famous names in businesses are included here:  Stephen Covey, Peter Drucker, Steve Jobs, Barak Obama and more… read them now.

Frequently asked questions

Does Elon Musk support outsourcing?

Musk generally prefers vertical integration to outsourcing for Tesla, modeling the company’s approach on Henry Ford’s ownership of the industries that supplied his factories.

Why does Elon Musk prefer vertical integration?

He believes it is good to combine engineering and production and that separating the two at different locations ends up being pretty inefficient, while also helping lower production costs at scale.

Does Tesla manufacture in China?

Yes. Musk has said there is no question Tesla will have a factory in China, which he describes as always going to be the second-biggest market after the U.S.

Why do smaller companies choose outsourcing over vertical integration?

For small and medium sized companies, vertical integration is expensive, time-consuming, and legally complex, whereas outsourcing requires a small initial investment, saves costs, and lets businesses focus on core operations.

Which other business leaders have opinions on outsourcing?

Outsource Accelerator has summarized the views of business titans including Warren Buffett, Rupert Murdoch, and Nike, alongside a wider collection of outsourcing quotes.