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You probably already know that Tesla broke delivery records again in Q3 2021, and by a huge margin. However, opponents continue to insist that Tesla is lying about his numbers, and there is no way he was able to produce or deliver so many cars amid a global chip shortage, as well as many other supply chain issues, not to mention the seemingly eternal impact of the global pandemic.
Morgan Stanley Senior Analyst Adam Jonas sent a letter to investors titled, “How did Tesla find the chips? While the note was probably a way of assuring investors that the bogus stories are bogus, Teslarati points out that we already knew how Tesla was handling the chip shortage based on a discussion of the Q2 2021 earnings call.
According to Tesla’s shareholders deck, it was working to reduce production shutdowns by using a series of new internal chips. Tesla explained in the deck:
“Our team has demonstrated an unmatched ability to respond quickly and mitigate manufacturing disruptions caused by semiconductor shortages. Our electrical and firmware engineering teams continue to work hard to design, develop and validate 19 new controller variants in response to ongoing semiconductor shortages.
That said, Jonas went into specifics, dividing the parts shortage situation into several categories, including Vertical integration, sophistication, negotiation and scale.
Tesla has been integrating vertically for years, and some would argue that it is more of a software company than a car maker. The less Tesla has to rely on suppliers and other companies, the more control it has over its development and production processes.
Jonas points out that Tesla’s internal development allows it to produce vehicles that are much more sophisticated than those using ordinary chips and parts shared by most automakers.
Additionally, Tesla’s in-house expertise gives it an advantage when it comes to negotiating with suppliers. Suppliers know that if they can’t get what it needs from Tesla when it needs it, the company can just produce its own. As the industry evolves, suppliers probably don’t want to lose Tesla as a customer, so they have to work hard to meet the demands of the electric vehicle maker.
Finally, Jonah writes on the scale. Tesla is smaller than the competition, but its growth is exponential. Its record quarter depended on just two factories. Meanwhile, two more factories are expected to open in the very near future. Jonas says many suppliers are aware that Tesla is a “strategic customer,” so it’s wise to keep this relationship positive.
It seems that so far some vendors are keeping Elon Musk happy and impressed.
As always, we look forward to hearing your comments and your conversation on this topic. Head over to our comments section and drop us a line.
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