Tesla pursues what Jay B. Barney, author of Gaining and Sustaining a Competitive Advantage might characterize as a limited diversification strategy, as most of their business activity is vertically integrated and does not diversify into any unrelated lines of business. Under these conditions, management does apply some diversification, but only to the extent that it enhances the core mission of Tesla to transform the auto industry by producing EVs. For instance, Tesla invests significantly in its EV battery business segment, which helps the company maintain its cutting edge battery technology in their EVs. While centered around this main objective to enhance battery performance in their EVs, the company also aims to create battery products for other applications.

Tesla, like most businesses, began as a single-business firm, focused on producing electric vehicles. In May 2015, Musk announced Tesla Energy, expanding the company’s capabilities into a new segment called Energy Generation and Storage. Tesla further invested in solar batteries and battery storage by acquiring Solar City Corporation in 2016. As of 2020, Tesla’s EV batteries are supplied by Panasonic but they are looking to reduce their dependence on them by producing their own batteries.