Almost every EV manufacturer except Tesla was affected by chip shortage until recently when Elon Musk admitted that it is beyond control. Interestingly Tesla dealt with chip shortage by rewriting software and using alternative chips.
Musk said in the earnings call Q2, 2021, “We were able to substitute alternative chips, and then write the firmware in a matter of weeks. It’s not just a matter of swapping out a chip; you also have to rewrite the software.”
Last three months, the company was able to deliver more than 200,000 cars, which was possible when they changed the code. Daimler, BMW, General Motors are a few among the ones where chip-shortage impacted their revenue. Now, the shortage has hit Tesla too, where rewriting is not the permanent solution. As said by Musk, “Tesla’s future growth will depend on a swift resolution to the global semiconductor shortage. The global chip shortage situation remains quite serious,”
He added, “For the rest of this year, our growth rate will be determined by the slowest part in our supply chain.” Furthermore, the airbags and seatbelts need chips, as the car is a smart car with effective safety measures. Musk mentions that the car cannot be shipped without those, so supply chain pressure is unavoidable.
$1.4 billion profit in Q2
On another note, he says that the situation seems to be getting better, but it is still unpredictable. The company noted in the second-quarter report, “Our electrical and firmware engineering teams remain hard at work designing, developing and validating 19 new variants of controllers in response to ongoing semiconductor shortages,”
Tesla noted remarkable profits this year in Q2. As noted in the earnings call, “In the second quarter of 2021, we broke new and notable records. We produced and delivered over 200,000 vehicles, achieved an operating margin of 11.0% and exceeded $1B of GAAP net income for the first time in our history,”
While the chief financial officer said that Tesla would do better in the coming months, it is contradicting Elon Musk’s statement on the unpredictable chip-shortage issue. It is plausible that Tesla has further planned to deal with the situation, but that might not work. As the competition is also working on dealing with chip shortages, it gets even tougher.
On the other hand, Tesla uses only sustainable materials and that are “conflict-free“. Which makes it harder for them to get supplies from reliable suppliers. Additionally, more models like Cybertruck and Semi are yet to come to the market. There might be a delay in their production. Depending on the Q3 performance, Cyberturck’s deliveries could start this year.