Tesla is struggling with the global chip shortage and port disruptions © STR/Getty Images
Tesla is struggling with the global chip shortage and port disruptions © STR/Getty Images

Tesla's supply chain faces 'insane difficulties'

27 April 2021

Elon Musk said Tesla faced “some of the most difficult supply chain challenges that we've ever experienced” in the first quarter of 2021.

The Tesla boss told investors on the firm’s quarter one earnings call there had been “insane difficulties” in the supply chain, including global chip shortages, port disruptions and issues surrounding scaling up production in China.

“We had quite a difficulty with scaling our production in China because we were unable to get engineers there because of Covid quarantine restrictions,” he said.

In February, Tesla was forced to halt production at its assembly plant in California, blaming supply chain issues caused by backlogs at ports and severe snowstorms.

Zach Kirkhorn, chief financial officer at Tesla, added the firm would “continue to work through the instability of the global supply chain, particularly around semiconductors and port capacities”.

“While the Tesla team in partnership with our suppliers did tremendous work keeping our factories running, we did experience high expedited costs in the quarter… with some minor interruptions to production,” Kirkhorn said. 

“We believe that this landscape is improving but it does remain difficult and it’s an evolving situation,” he said.  

Other automakers including Jaguar Land Rover, Ford and Volkswagen have all been forced to temporarily shut down production sites around the world over the last few months as a result of the global chip shortages. 

Martin Lundstedt, chief executive of Volvo, warned while the shortage of semiconductors had limited impact on the carmakers’ production in the first quarter of 2021, the supply chain “remains very unstable and the uncertainty about the development is high”.

Lundstedt’s warning echoed Volvo spokesperson Claes Eliasson, who last month said that output may come to a standstill for two to four weeks at the beginning of the second quarter after a chip factory fire exacerbated supply issues.

Meanwhile, Cisco CEO Chuck Robbins said shortages of semiconductors were likely to last for the remainder of the year. 

He told the BBC: “We think we've got another six months to get through the short term.

“The providers are building out more capacity. And that'll get better and better over the next 12 to 18 months.

“Right now, it is a big problem because semiconductors go in virtually everything.”

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