EV Market in China - Tesla Production
Tesla’s Component Supply Tight, but Better Than Others
Chinese automotive supply chain sources said Tesla Inc.’s supply of components — particularly semiconductor chips — has remained tight during March, in line with the findings in OTR Global’s March 3 China EV market report. “I think almost all automakers are suffering from chip shortages. I heard Tesla cut a steering component from some cars to deal with the chip shortage. We expect chip shortages to last through this year, as the company is increasing capacity and other auto makers also increase purchases,” one electric battery source said. Another component source said, “Texas Instruments [Inc.] and STMicroelectronics [N.V.] have insufficient supply of power IC, including TPS and LM series. And I think Tesla will be impacted by this.”
Sources said prices of raw materials have increased significantly during March because of regional pandemic outbreaks, the Russian war on Ukraine, resource constraints and global political and trade issues. Sources expect this array of complications to prolong component shortages. “Prices of basic raw materials such as nickel, neon, xenon and krypton have increased because of the Russia-Ukraine conflict and may increase costs of automotive components. We think the component shortages may extend to 2H22, though the situation may improve then,” one said. Another said, “The supply shortage of materials like Xenon gas, which is used in semiconductor production, might cause a further shortage of semiconductors. Also, the limited production capacity of lithium has already caused the cost and price rise of carbonate lithium and EV batteries.”
However, sources believe Tesla has fared better than most EV makers in managing supply-chain challenges because of its dominant market position and strong supply-chain management. “Tesla’s component shortages are not as serious compared with many other high-end automakers such as Nio [Inc.], XPeng [Inc.] and Li Auto [Inc.] because of its dominant position in the global EV market. The company has strong capital power to pay higher prices than others in order to get components first,” one said. Another said, “Tesla has long-term supply contracts with some main suppliers, but cost increases might be a concern.” This mirrors commentary in OTR Global’s March 23 German EV market report, in which sources projected market share gains for Tesla partly because of its better availability versus competitors.
Strong Expectations for Tesla’s 2022 Production in China
Citing a strong recovery in global demand and expanding production capacity at Tesla’s Shanghai factory, sources expect Tesla’s Chinese car production capacity to nearly double in 2022 yy, reaching close to 1 million units, compared with 500,000 units in 2021. Another source said, “It is not clear when [a] second Shanghai plant [could] come online, but the existing Shanghai factory surpassed its Fremont factory in production last year.”
Similar to the March 3 China EV report, sources said Tesla has continued to increase its focus on export opportunities from the Shanghai factory, especially for European markets. One expects Tesla to increase production of components like power systems and motors in its Shanghai factory to meet export demand. “As Tesla has just started production at its German factory, the Shanghai factory is more important in its global landscape,” said one source.