Elon Musk: Tesla’s biggest challenge is supply chain, but it’s not a long-term issue

[Credit: HBO]

Tesla CEO Elon Musk said that his company’s biggest issue in the short term is supply chain, especially when it comes to microcontroller chips.

“Our biggest challenge is supply chain, especially microcontroller chips. Never seen anything like it,” Musk said in a Tweet during the early morning hours on Wednesday. “Fear of running out is causing every company to overorder.”

For months, the automotive industry has been confronted with a shortage of semiconductors and microcontroller chips. These chips help control the “brain” of a vehicle and can operate everything from fuel injection systems in combustion engine cars to infotainment systems in electric cars. This year, there has been a major shortage due to overbuying by large automotive manufacturers, a situation that has been caused by tensions between the United States and China. China is a global powerhouse in semiconductor chip production, and companies have panic bought large quantities of these chips to compensate for the possibility of running out.

Several automakers have shut down production lines in various regions globally due to not having enough semiconductors or microcontrollers to handle regular production rates.

Musk compared the issue to the toilet paper shortage that occurred last year during the COVID-19 pandemic. Consumers panic bought toilet tissue due to the fear of being quarantined for an extended period of time. This ultimately caused a massive shortage, and large retailers were forced to limit the quantity that could be purchased per family to remain stocked.

Despite the short-term problems that this has caused Tesla and many other large car companies in the world, Musk believes that it won’t affect his car company down the road. “It’s obv[iously] not a long-term issue,” the CEO added.

Tesla was able to avoid some of the semiconductor shortages by pivoting away from the tech altogether. In the company’s Q1 2021 Update Letter, Tesla outlined how it navigated through supply chain shortages by utilizing microcontrollers instead.

The company wrote:

” In Q1, we were able to navigate through global chip supply shortage issues in part by pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers.”

Tesla has been able to distance itself from production halts at its factories, apart from a rumored two-week hiatus in Model Y production lines at Giga Shanghai in China. Instead, Tesla has refined its products and continued to work on releasing the new Model S and Model X vehicles that the company redesigned and released in January. Deliveries on the new Model S are expected to begin on June 10th with a dedicated delivery event at Tesla’s Fremont Factory in Northern California.

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Elon Musk: Tesla’s biggest challenge is supply chain, but it’s not a long-term issue
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