Why Tesla Appears to Be Feeling the Pinch Of Supply Chain Constraints

Tesla has so far weathered supply chain constraints fairly well but it looks like the industry-wide issue is coming back to haunt the company.

Tesla said in its third-quarter earnings statement that it continues to run its production lines as close to full capacity as conditions allow despite the continuation of global supply chain, transportation, and other manufacturing challenges.

The company said it is targeting sequential growth in the fourth quarter but the magnitude of growth will be determined largely by outside factors. Tesla’s CEO Elon Musk has also sounded out supply chain challenges multiple times in the past.

The Tesla assembly plant in Tilburg, Netherlands.

Nevertheless, Tesla has continued its record deliveries streak, thanks to its judicious supply chain management. In the third quarter, the company delivered a record 241,300 vehicles, beating the consensus estimate of 233,000. It now appears that Tesla could be facing a drag from supply chain challenges.

Some of Tesla vehicles delivered recently have come without USB-C ports and wireless charging in the front center console, reports suggested, citing social media posts by Tesla users.

A Twitter user going by the handle @Dkurac who tweets about Chinese electric vehicle companies said in a tweet Monday that Model 3 and Model Y vehicles produced after November 6 might not have the installed USB port due to IC/component shortages. He went on to say that the ports will be added in December.

Musk’s reply to a Twitter user’s question regarding the availability of the Tesla Semi in the wake of PepsiCo CEO’s comments regarding taking delivery of the vehicle in the fourth quarter also suggests the EV maker is seeing an impact. Musk said it is not possible to produce additional vehicles in volume until chip supply and cell supply are addressed.

Fourth-quarter production may give a hint on whether the impact will stretch beyond new model introduction and begin to hurt the production of existing models. Even without the supply constraints, Tesla is facing a situation of demand outstripping supply.

“Tesla has a high-class problem of demand outstripping supply with this issue now translating into [5-month to 6 -month] delays for Model Ys [and] some Model 3s in different parts of the globe,” Wedbush analyst Daniel Ives said in a recent note.