Elon Musk Admits Tesla Chip Shortage Is an 'Extremely Difficult' Problem: How Did EV Company Solve It?

Elon Musk Admits Tesla Chip Shortage Is an 'Extremely Difficult' Problem: How Did EV Company Solve It?
Tesla shocked the automotive world with its impressive third quarter delivery performance, producing up to 237,832 vehicles and delivering up to 241,300 vehicles. Interestingly, Elon Musk tweeted his thoughts on the topic. Photo : Justin Sullivan/Getty Images

Tesla shocked the automotive world with its impressive third quarter delivery performance, producing up to 237,832 vehicles and delivering up to 241,300 vehicles. Analysts from Morgan Stanley explained the secret to Tesla's success in an investor note called "How Did Tesla Find Chips?"

Interestingly, Elon Musk tweeted his thoughts on the topic.

According to Teslarati, Tesla broke past the Wall Street consensus estimate of 222,700 deliveries for Q3 2021. Wall Street predicted this season would be Tesla's "strongest ever" sales performance, and Tesla surpassed all expectations.

Among the 241,300 vehicles that Tesla delivered, a total of 9,275 units were Model S and Model X. The remaining 232,025 units were Model 3 and Model Ys. The numbers are overwhelmingly huge, especially since many of the current industries report chip shortages problems. Investors immediately got interested with Tesla's success story.

Tesla Chip Shortage Resolved! A Huge Boost on Tesla Earnings

Twitter user @SawyerMerritt tweeted Morgan Stanley's investor's note. The note was drafted by lead analyst Adam Jonas, who examined Tesla's ability to avoid public stoppages in vehicle production and even capture the best quarter in company history.

Jonas said Tesla's success lies in four of the automotive company's unique traits: Vertical Integration, Sophistication, Negotiation, and Scale.

Vertical Integration

Tesla arguably has one of the most vertically integrated original equipment manufacturer (OEM) systems in the automotive industry. Because of this, the company easily identified and mitigated supply chain distribution. Tesla ensured no materials would get wasted on its automotive construction.

Sophistication

Aside from parts, Tesla automotive also boasts advance and unique technologies. Tesla has historically designed their own silicon, which also applies to the latest generation of processor technology on the vehicles. Again, this helps ensure a good resupply chain.

Read Also: Tesla Autopilot Bug: Elon Musk Promises Bug Report Tool After Users Complain of Problematic Autopilot

Negotiation

Despite being vertically integrated on the market, Tesla maintained its relationship with suppliers for parts it doesn't make. This is because Tesla's culture is more ambitious and diverse than other OEMs.

Scale

While Tesla is advertised as the most iconic electric vehicle (EV) manufacturer, it has a relatively smaller OEM scale. This mitigates the scope of supply tightness. Jonas promptly called Tesla a "strategic" customer.

In another report, Teslarati quoted Tesla's sentiments: "Our team has demonstrated an unparalleled ability to react quickly and mitigate disruptions to manufacturing caused by semiconductor shortages. 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."

Elon Musk Reveals Its 'Extremely Difficult'

Infamously known for being highly participative with tweets, Tesla CEO Elon Musk tweeted a reply to Teslarati's reports. He said the whole process was "extremely difficult" and immediately acknowledged the efforts of Tesla's engineering, supply chain, production, and key suppliers.

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