How Elon Musk’s Software Focus Helped Tesla Navigate Chip Shortage

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The electric-vehicle maker is expected to manufacture about 80% more vehicles this year than in 2020

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Industry executives and consultants said Tesla has been able to keep production lines running by leaning on in-house software engineering expertise, which has made it more efficient than many rival auto makers at accommodating a global shortage of semiconductors. Chips are used in everything from controlling electric motors to charging phones.

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For example, Tesla was able to quickly rewrite the software needed to integrate alternative chips into its vehicles earlier this year when faced with shortcomings, said the company’s chief executive, Mr. Musk.

Semiconductor executives and consultants said Tesla, still as a relatively young car company, had the advantage of designing its vehicles from the ground-up, rather than adding parts piecemeal for decades, as many legacy auto makers did. Is. This allowed Tesla to strengthen the system, some of them said.

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According to a Bain & Co. study based on the 2019 Model 3, in Tesla’s Model 3 sedan, a group of semiconductors enable features such as speaker control and voice and gesture recognition, which are different by using more chips in many other vehicles. will be controlled by

Ganesh Murthy, chief executive officer of semiconductor supplier Microchip Technology Inc., said electric-vehicle-focused producers benefit from being more rooted in technology than traditional car makers.

“In many respects they’re more connected, and I think they’re able to be more flexible in what they’ve built as a result,” he said.

Tesla did not respond to a request for comment about its chip-sourcing strategy.

Traditional auto manufacturers often let parts suppliers handle the sourcing chips. Some semiconductor executives and analysts said that Mr Musk’s preference to make vehicle components in-house meant Tesla had greater supply-chain visibility in some areas, which had built close ties with semiconductor companies before the crisis, Some semiconductor executives and analysts said. For example, Tesla has designed a computer that enables its advanced driver-assistance technology in new vehicles.

“Anything where they decided to build something themselves, well, they should have a direct relationship with a semiconductor supplier,” said Nakul Duggal, who leads Qualcomm’s automotive business. Inc.,

Which designs the chips and supplies Tesla.

Chip shortages date back to late 2020, when demand for vehicles grew faster than expected due to the pandemic, surprising auto makers.

According to consulting firm AlixPartners LLP, without enough semiconductors, car companies are on track to manufacture about 77 million vehicles globally this year, which is about 9% less than expected in January.

Tesla’s Chief Financial Officer Zachary Kirkhorn said in October that Tesla’s expertise in the chip industry and consistent messaging to suppliers has helped the company manage supply-chain challenges.

“We have never reduced our production forecast with our suppliers because we are adding capacity as quickly as possible,” he told analysts.

Tesla is not immune to supply-chain problems. The company has run below capacity and, in February, temporarily closed its Fremont, California plant due to a parts shortage. According to a person familiar with the matter, Mr Musk has told employees that he also worked around the shortcomings by building cars with missing parts that needed to be added back in later.

Mr Musk has cited a lack of a chip in delaying the rollout of the new models. Tesla’s long-awaited electric pickup truck and semitrailer truck, both of which were slated to enter production this year, are now set to enter production in 2022 and 2023 respectively.

Traditional car makers are now becoming more chip-centric. ford motor Co.

and General Motors Co.

Last month announced agreements with semiconductor companies to develop computer chips.

research firm gartner Inc.

The forecast is that by 2025, half of the top 10 auto makers by market capitalization will design at least some of their own chips.

Meanwhile, the world’s embrace of electric vehicles and Tesla’s rising valuations have made Mr. Musk’s company a more attractive customer for some parts suppliers, executives and lawyers.

Dan Sharkey, a Detroit-area attorney representing automotive suppliers, said some of his customers are willing to do something for Tesla that they are not to other carmakers. “They think they’re catching a rising star,” Sharkey said, adding that Tesla’s relatively small output can sometimes work in the company’s favor. “It’s easy to say, okay, we’ll take care of these little kids.”

Tesla is on pace to easily meet its target of 50% growth in total vehicle deliveries over last year’s nearly half a million. It placed over 627,000 vehicles in the hands of customers during the first nine months of the year. The company’s relatively small size and growing demand for electric vehicles make it easy to keep up with the rapid growth. It also made it a priority for customers to receive the vehicle even if they were missing some parts.

Mo Siddiqui, who lives in Hamburg, Germany, said he received a text message from Tesla earlier this month advising him that due to supply-chain problems, the roughly $70,000 Model Y compact sport-utility vehicle The one they bought can be delivered without anything. USB port or wireless phone charging capability.

Mr Siddiqui was able to schedule the vehicle to be retrofitted within two weeks of picking up the vehicle. “I can live with it,” he said.

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Write Rebecca Elliot [email protected] Feather

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