SAN FRANCISCO (Reuters) – Tesla’s ability to design components in-house has given the automaker flexibility to make parts modifications and deal with supply chain problems that have afflicted other automakers even harder, sources and experts said.
Tesla boosted its deliveries by 87% to a record high in 2021, sending its shares up more than 13% on Monday.
Here are some of the ways Tesla has weathered supply chain challenges.
How did Tesla deal with the global chip shortage?
Tesla told some customers that they could pick up the car with some missing parts, such as Bluetooth chips and USB ports. Tesla also removed some features such as the radar sensors and lumbar support for the front passenger seats, making the vehicle less complicated to build. Tesla did not respond to a Reuters request for comment.
Tesla has also raised vehicle prices to counter higher costs, including “acceleration costs” for parts. American consumers have to wait seven months if they order a version of the Model Y, whose prices rose 18% last year.
Tesla CEO Elon Musk said Tesla was also able to replace replacement chips with some chips that were in short supply. Volkswagen CEO Herbert Diess said Tesla’s ability to rewrite software to support new chips within 2-3 weeks has been impressive.
How is Tesla different from other automakers?
Tesla designs more hardware and writes more software than many competitors who rely on the efforts of car suppliers. Musk has described the company as “ridiculously vertically integrated compared to other car companies.”
“We design circuit boards ourselves, which allows us to quickly modify their design to fit alternative chips such as power chips,” said a Tesla insider.
In-house engineers design the bulk of the complex software that runs Tesla’s cars, which Musk described as a “computer on wheels.”
Tesla also designs the chips used in driver assistance systems and makes parts ranging from seats to battery cells inside the home. It also owns its own direct sales, service and shipping networks.
“We design and build a lot more of the car than other OEMs (original equipment manufacturers) who are going to go pretty much to the traditional supply base and, as I call it, catalog engineering. So it’s not very adventurous,” Musk said.
“They control what happens in that car to a level that no other automaker wants to do,” said Ambrose Conroy, CEO of Seraph Consulting. “It’s more in line with the integration Henry Ford originally had with the Model T.”
HOW TO ORDER TESLA SECURE CHIP
In 2020, many automakers cut chip orders as pandemic and lockdown measures hurt demand. Zach Kirkorn, Tesla’s chief financial officer, said Tesla never lowered its production expectations with suppliers, because it expected rapid growth, which helped it weather the chip shortage.
“They’ve been smarter about that than other companies about making sure they have a buffer,” said a Tesla supplier executive.
Kevin Anderson, a principal advisor at Write-Tek, said Tesla’s direct relationships with chip suppliers have allowed it to move faster than traditional automakers, which rely on top-tier suppliers with relationships with chip makers.
(Reporting by Hyunjoo Jin; Editing by Peter Henderson and Richard Boleyn)
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