Tesla masterfully avoided the microchip crisis by controlling its own software; Record sales in 2021

Most automakers around the world have been suffering for months from the current microchip crisis, which has made them a scarce commodity and forced the production of some models to be postponed or suspended for long periods. As a result, dealers could not guarantee delivery dates and were forced to cut sales, sometimes also causing prices to spike. However, there’s one OEM among them that clearly doesn’t seem to have suffered from this issue at all: Tesla has continued to break sales records quarter after quarter, selling almost twice as many vehicles in 2021 as they did in 2020.

A key element is Open source software (OSS): Computer software released under a license in which the copyright holder grants users the right to use, study, modify, and distribute the software and its source code to anyone and for any purpose . Free software can be developed in a public and collaborative way; it is a prime example of open collaboration, meaning that any capable user can participate in development online, making the number of possible contributors indefinite. The ability to examine the code facilitates public confidence in the software, and its development can bring diverse perspectives beyond those of a single company. Long ago, a 2008 report by the Standish Group indicated that adopting open source software models saved consumers about $60 billion a year.

The open source code can be used for study and allows end users able to adapt the software to their personal needs in the same way that user scripts and custom style sheets allow websites, and possibly publish the modification in as a fork for users with similar preferences, and directly submit possible improvements as pull requests.
Tesla, and Elon Musk, who likes to express himself a lot on social networks (Twitter), have so far said very little on this key subject. Despite this silence, however, it is becoming increasingly clear that Tesla’s unified computing architecture and control of its own software was at the very least an important factor.

Like any other automaker, Tesla was unable to obtain the microchips it had previously ordered in sufficient numbers to keep up with the production volume of its factories. However, unlike almost all other OEM automakers, by owning its software, Tesla was able to access it, modify it, and rewrite it as it wished and thus take advantage of available chips from other vendors. “We used alternative parts and programmed software to mitigate the challenges caused by this shortage,” Tesla said in its third quarter 2021 earnings report.

Tesla FSD, courtesy of Tesla Inc.

Most mainstream car manufacturers don’t have this option because their software (which in most cases is not open source, i.e. it comes in a closed “black box” that doesn’t is not accessible) and their material are also under the control of the suppliers. This essentially creates a direct and artificial technological dependency. In fact, as The New York Times reports, in many cases these legacy OEMs have also relied on these same vendors to deal with microchip makers, thereby losing the bargaining power needed to negotiate. In other words, they were disconnected from the supply chain of these materials, which complicated their situation a little.

Morris Cohen, a professor at the Wharton School at the University of Pennsylvania, says that “Tesla – born in Silicon Valley – has never outsourced its software, so it writes its own code”. In this way, Tesla was able to rewrite and modify the software that runs on the chips that were in short supply in order to adapt it to chips from other brands that were not in short supply. “Tesla controlled its own destiny,” he added.

Tesla Model 3, courtesy of Tesla Inc.

Tesla has become famous around the world for being able to create some of the most capable electric cars on the market: Model 3, Model Y, Model X and Model S, offering incredible car performance accompanied by very high quality. and widely available. charging network infrastructure. Tesla’s Unified Computing Architecture and AI standards haven’t made the headlines on social media or the press, but they’ve certainly provided a very significant competitive advantage since the company’s early days.

Tesla Model Y, courtesy of Telsa Inc.

Now, several years later, the entire auto industry is beginning to realize that there is much more to Tesla than just its philosophy when it comes to creating performance electric cars, and that ‘they need to take control of their vehicle’s computer systems and software for their own benefit. As an example of this change, The New York Times reports that Mercedes Benz plans to use fewer specialized chips, moving to more standardized semiconductors in its next models, in addition to having an army of artificial intelligence engineers access, study and modify all software for its upcoming (and in some cases, for some current) models.

All images courtesy of Tesla Inc.

Nico Caballero is Cogency Power’s Vice President of Finance, which specializes in solar energy. He also holds a degree in electric cars from Delft University of Technology in the Netherlands and enjoys researching Tesla and EV batteries. He can be reached at @NicoTorqueNews on Twitter. Nico covers the latest in Tesla and electric vehicles at Torque News.