May 21, 2022 5:09 pm

Chip shortage: why Tesla managed to overtake other electric car manufacturers like Ford and GM

For much of the past year, big automakers like General Motors and Ford Motor Co. have experienced a different reality than Tesla, the company that makes electric cars.

Due to the shortage of computer chips, GM Y Ford they had to shut down—sometimes for months—one factory after another, leaving dealerships empty and prices skyrocketing. But nevertheless, Tesla recorded their highest sales in all quarters and closed the year having sold almost twice as many vehicles as in 2020, without being prevented by the prevailing crisis in the entire industry.

Tesla’s ability to stock essential components is more important than annual sales of the cars. That ability means this company, and perhaps other electric-car startups, can threaten the supremacy of giants like Volkswagen and GM more quickly and forcefully than most policymakers and industry executives think. This would help efforts to reduce climate-changing emissions by weaning out more gasoline-powered cars more quickly. But it could also harm millions of workers, thousands of suppliers, and many local and national governments whose jobs, businesses, and tax revenue depend on the traditional car production.

Tesla and its enigmatic CEO, Elon Musk, haven’t said much about how the car company managed to outperform the rest of the auto industry. It is now coming to light that it had a greater command of the technology and its own supply chain. Apparently, Tesla foresaw demand best than the companies that produce many more cars than it does. Other automakers were surprised by how quickly the auto market recovered from the precipitous slump it took early in the pandemic and simply hadn’t ordered enough chips and components fast enough.

When Tesla couldn’t get the chips he needed, took what was available and rewrote the software programs to work according to your needs. The largest auto companies they couldn’t do the same because bought much of their software and computer skills from outside vendors. In many cases, automakers also relied on those suppliers to deal with chipmakers, and when the crisis hit, these automakers had no bargaining power.

A few years ago, analysts viewed Musk’s insistence that Tesla do more on its own as one of the main reasons the company was struggling to ramp up production. Now, his strategy seems to have been vindicated.

Cars are increasingly digital, defined by their software as much as their engines and transmissions. It’s a reality that some old-guard car companies are increasingly recognizing. many, like Ford and Mercedes-Benz, have said in recent months that they are hiring engineers and programmers to design your own chips and write your own software.

“Tesla, originally from Silicon Valley, never outsourced their software, they write their own code there,” said Morris Cohen, a professor emeritus at the University of Pennsylvania’s Wharton School of Business who specializes in manufacturing and logistics. “They rewrote their programs in such a way that they could replace chips that were in short supply with those that were available. The other car manufacturers couldn’t do the same.”

“Tesla took charge of its own destiny,” Cohen added.

In 2021, Tesla sold 936,000 cars all over the world, a 87 percent increase in a year. Ford, GM and Stellantis, the company formed by the merger of Fiat Chrysler and Peugeot, they sold fewer cars in 2021 than in 2020.

If the vehicles sold globally are considered, in 2021, Tesla overtook Volvo and Subaru, and some analysts forecast it could sell two million cars this year because factories in Berlin and Austin, Texas, are starting to operate, and because a plant in Shanghai is ramping up production. That would put Tesla on the same level as Mercedes and BMW, something that, just a couple of years ago, few people in the industry thought would be possible.

of course that GM and Ford sell a lot more cars and trucks. Last week, both companies said that, in the United States alone, they sold nearly two million vehicles last year.

Tesla, which rarely answers questions from reporters, did not respond to a request for comment for this article. He has said almost nothing in public about how he managed to prosper in a depressed market.

“We have used alternative components and programmed the software to reduce the challenges caused by this shortage,” the company explained in its third-quarter earnings report.

His performance shows a very marked recovery compared to 2018, when he was the laughing stock of the industry due to his supply and production problems. Many of the manufacturing errors were the result of Musk’s insistence that the same company make several of its components.

Other car companies have realized that they need to implement some things that Musk and Tesla have been doing all this time and are in the process of taking over their computerized systems.

Mercedes, for example, plans to use fewer specialized chips in upcoming models and more standardized semiconductors, as well as write its own software programs, said Markus Schäfer, a member of the German company’s board of directors who is overseeing purchases.

The Tesla factory in Berlin this month. Some analysts predict that Tesla could sell two million cars this year as the company ramps up production.Patrick Pleul/DPA, via Associated Press

In the future, Mercedes “will make sure that we have customized and standardized chips in the vehicle,” Schäfer said in an interview on Wednesday. “Not a thousand different chips.”

Mercedes will also design its own vehicle hardware, he said. Without mentioning Tesla, Schäfer added: “Others have probably already traveled this path.”

The fact that Tesla did more tasks independently also helps explain why. did not suffer from battery shortage, which has prevented companies like Ford and GM from selling many electric cars. In 2014, when most automakers were still arguing over whether electric vehicles would succeed, Tesla pioneered what it called a megafactory outside Reno, Nevada, to produce batteries alongside partner Panasonic. Now, that factory guarantees a secure supply.

“It was a huge risk,” said Ryan Melsert, a former Tesla executive who was involved in building the Nevada plant. “But because they’ve made a decision to do things in-house from the beginning, they have much more control over their own destiny.”

As Cohen, the professor at Wharton, pointed out, in many ways Tesla’s approach is a throwback to the early days of the automobile, when Ford owned its own steel plants and rubber plantations. In recent decades, conventional automotive wisdom said that manufacturers should focus on design and final assembly and leave the rest to suppliers. That outsourcing strategy helped reduce the amount of money big companies put into factories, but left them vulnerable to supply chain turmoil.

It also helps that Tesla be a company much smaller than Volkswagen and Toyota, which in a good year produce more than ten million vehicles each. “To get started, is a smaller supply chainsaid Melsert, who is now CEO of American Battery Technology Company, a recycling and mining company.

Tesla’s lineup is also more modest and easier to stock. The Model 3 sedan and Model Y sport utility vehicle accounted for nearly all of the company’s sales in 2021. In addition, Tesla offers fewer options than many of the traditional car companies, which simplifies manufacturing.

“This is a more simplified approach,” said Phil Amsrud, senior principal analyst at research company IHS Markit, an expert on automotive semiconductors. “They don’t try to handle a lot of different configurations.”

Tesla’s software, which can be updated remotely, is considered the most sophisticated in the automotive industry. However, the company’s cars are likely to use fewer chips, analysts say, because the company controls functions such as battery cooling and autonomous driving from fewer centralized on-board computers.

“Tesla has fewer boxes,” Amsrud said. “The fewer components you need, the better.”

Of course, Tesla may still have problems when it tries to repeat the growth it achieved in 2021: Its goal is to increase annual sales by about 50 percent for the next few years. The company acknowledged in its third quarterly report that its creative maneuvering in the face of supply chain chaos may not work as well as it ramps up production and requires more chips and other components.

Furthermore, the market for electric cars It is becoming much more competitive as traditional car companies are belatedly responding with models people want to buy instead of the small electric vehicles typically made to please regulators. Last week, Ford mentioned that due to high demand, will almost double the production of the Lightning, an electric version of his popular F-150 pickup truck. The pickup truck Tesla will take at least a year more to go on sale.

This year is likely to improve the outlook for traditional auto companies as shortages of semiconductors and other components are resolved and automakers are better prepared to deal with them.

Tesla vehicles continue to have quality problems. In December, the company told regulators that it thought withdraw over 475,000 cars due to two defects. One could cause the rear camera to fail and the other could cause the front hood to pop open. In addition, federal regulators are inspecting the safety of its Autopilot system, which can make the car speed up, brake and turn on its own.

“Tesla will continue to grow,” said Stephen Beck, managing partner at cg42, a management consulting company in New York. “But it’s facing more competition than ever, and that competition is getting stronger.”

However, this automaker will still have the fundamental advantage that got it through the chip crisis. Tesla only makes electric vehicles and is not hampered by habits and procedures that new technology has made obsolete. “Tesla began its history on a blank sheet of paper”Amsrud said.

Jack Ewing writes about business from New York, focusing on the automobile industry and the transition to electric cars. He spent much of his career in Europe and is the author of Faster, Higher, Farther, about the Volkswagen emissions scandal. @JackEwingNYTFacebook



Reference-www.lanacion.com.ar

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