How Tesla Survived Global Supply Chain Issues

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While other automakers have suffered from the ongoing chip shortage, Tesla increased its deliveries by 87% to a record high in 2021.

Tesla notified its customers that they could take vehicles despite some missing parts, such as Bluetooth chips and USB ports. Tesla also eliminated some features, such as radar sensors and lumbar support for passenger seats, making the vehicle less complicated to manufacture.

Tesla also raised vehicle prices to cover the higher costs, including “expedite costs” for parts. American customers have a seven-month wait when they order a Model Y version, whose prices have risen 18% in 2021.

CEO Elon Musk said the company was also able to replace chips that were in short supply with alternative chips. Volkswagen CEO Herbert Diess is particularly impressed with Tesla’s ability to rewrite software to support the new chips.

Tesla designs more hardware and writes more software than its competitors, who rely overwhelmingly on auto suppliers. Musk has called Tesla “absurdly vertically integrated compared to other auto companies.”

Most of the complex software that drives Tesla vehicles, which Musk calls “computer on wheels,” is designed by in-house engineers.

Tesla also develops the chips used in its driver assistance systems and manufactures parts in-house, from seats to battery cells. The company also has its own direct sales, service and charging networks.

In 2020, many automakers cut chip orders as pandemic and lockdown measures took a toll on demand. Despite these factors, Tesla never lowered its production forecast with suppliers because it expected rapid growth, which helped the company succeed during the chip shortage, said Tesla Chief Financial Officer Zach Kirkhorn.

For more information, read the original story in Reuters.

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