Tesla chief Elon Musk said that the ongoing microchip shortage is like the scarcity of toilet paper in the early days of the COVID-19 pandemic and accepted that it is a big challenge for his electric car company.
In a tweet, he, however, assured that it isn’t a long-term issue.
The pandemic has seen a rise in demand for many electronics and computers that the supply chain couldn’t handle, especially the semiconductor industry. This microchip shortage, in turn, has affected the automotive industry, which is increasingly becoming a big consumer of microchips.
On Wednesday, a Twitter user — @p_ferragu — uploaded a post saying, "Quick thought - Fact: $TSLA (Tesla) is shipping cars from China to Europe and increasing prices in the US underlying reality: demand in the US is insane, Tesla has to increase prices and keep all local production onshore to manage it. 2Q21 print will be interesting!"
Responding to the tweet, Musk wrote, "Our biggest challenge is the supply chain, especially microcontroller chips. Never seen anything like it. Fear of running out is causing every company to over-order – like the toilet paper shortage, but at an epic scale. That said, it’s obviously not a long-term issue."
This was the second tweet by Musk in two days on the supply chain crisis. On June 1, he had tweeted, "Prices (of Tesla cars) increasing due to major supply chain price pressure industry-wide. Raw materials especially."
In a bid to deal with the crisis, Tesla is already taking significant steps to secure more chips, including paying in advance for supply and even considering buying a chip factory, according to a Financial Times report.
Musk's remarks come two days after AlixPartners, a consulting firm, predicted that the shortage in microchip supply will cost automakers $110 billion in lost revenues in 2021. A recent AlixPartners report pointed out, "The world is in the grips of a global chip shortage, with demand for semiconductors surging beyond supply capacity. The shortage is crippling players in a diversity of industries, though carmakers seemingly have it the worst."
Besides automakers, technology companies have also been hit due to the current shortage of semiconductors.
First Published: IST