Happy Nice Mall

For much of the past year, established automakers like General Motors and Ford Motor have operated in a different reality than electric car company Tesla.

GM and Ford closed one plant after another—sometimes for months. shortage of computer chipsleaving dealer lots bare and zooming in on car prices. Still, Tesla stood up record sales quarter-to-quarter and ended the year by selling almost twice as many vehicles as it did in 2020, unaffected by an industry-wide crisis.

Tesla’s ability to assemble critical components is more important than a year’s worth of car sales. He suggests that the company, and possibly other young electric car businesses, could threaten the dominance of giants like Volkswagen and GM sooner and more strongly than most industry executives and policymakers realize. This will help efforts to reduce climate-changing emissions by replacing more gasoline-powered cars sooner. But jobs can hurt millions of workers, thousands of suppliers, and multiple local and national governments that rely on traditional auto manufacturing for their jobs and tax revenue.

Tesla and its enigmatic CEO, Elon Musk, have said little about how the automaker is running circles in the rest of the auto industry. Now, it is clear that the company has a superior command of technology and its own supply chain. Tesla seemed to anticipate demand better than businesses that produced many more cars than it did. Other automakers were surprised at how quickly the auto market was recovering from the steep decline at the start of the pandemic and not ordering chips and parts fast enough.

When Tesla couldn’t get the chips he relied on, he took existing ones and rewrote the software that runs them to suit his needs. The larger auto companies couldn’t do this because they relied on outside suppliers for much of their software and computing expertise. In many cases, automakers also relied on these suppliers to do business with chipmakers. When the crisis hit, automakers lacked bargaining power.

Just a few years ago, analysts cited Mr. Musk’s insistence that Tesla do more things on its own as one of the main reasons the company struggled to increase production. Now, his strategy seems to have been justified.

Cars are becoming increasingly digital, defined by their engines and transmissions as well as their software. It’s a fact that some vintage car companies are increasingly accepting. Many, including Ford and Mercedes-Benz, said they had hired engineers and programmers in recent months to design their own chips and write their own software.

“Born in Silicon Valley, Tesla never outsourced its software – they write their own code,” said Morris Cohen, professor emeritus of manufacturing and logistics at the Wharton School at the University of Pennsylvania. “They rewrote the software so they could replace the undersupplied chips with chips that were not undersupplied. Other automakers couldn’t do that.”

“Tesla controlled his destiny,” Professor Cohen added.

Tesla sold 936,000 cars worldwide in 2021, an 87 percent increase for this year. Ford, general manager Stellantis, the company formed by the merger of Fiat Chrysler and Peugeot, sold fewer cars in 2021 than in 2020.

Measured by vehicles delivered worldwide, Tesla outpaced Volvo and Subaru in 2021, and some analysts estimate it could sell two million cars this year as factories in Berlin and Austin, Texas, come into operation and a factory in Shanghai increases production. That would put Tesla in the same league as BMW and Mercedes – something few in the industry thought possible a few years ago.

GM and Ford of course sell more cars and trucks. Both companies said last week that they sold nearly two million vehicles last year in the United States alone.

Rarely responding to reporters’ questions, Tesla did not respond to a request for comment for this article. He said little publicly about how he managed to rise in a down market.

“We used alternative parts and programmed software to mitigate the challenges posed by these shortcomings,” the company said in its third-quarter earnings report.

Performance is a sharp comeback from 2018. Tesla’s production and supply problems made a mockery of the industry. Much of the confusion with manufacturing stemmed from Mr Musk’s insistence that the company make many of the parts himself.

Other auto companies have realized that they need to do some of what Mr Musk and Tesla have done all along and are in the process of taking control of their onboard computer systems.

Markus Schäfer, member of the German automaker’s procurement board, said that Mercedes, for example, plans to use fewer custom chips in future models, use more standardized semiconductors and write its own software.

In an interview on Wednesday, Mr Schäfer said that in the future, Mercedes will “make sure we have customized, standardized chips in the car”. “Not a thousand different chips.”

Mercedes will also design its own vehicle equipment,” he said. “It’s probably been this way before,” added Mr. Schäfer, without mentioning Tesla.

Doing more on its own also helps explain why Tesla is avoiding the battery shortage that has limited companies like Ford and GM from selling large numbers of electric cars. In 2014, while most automakers were still debating whether electric vehicles would make any sense, Tesla agreed with its partner Panasonic in Reno, Nev. to produce batteries. Now, this factory helps to provide a reliable supply.

“It was a big risk,” said Ryan Melsert, a former Tesla executive involved in the construction of the Nevada plant. “But because they decide early to bring things home, they have a lot more control over their own destiny.”

As Professor Cohen of Wharton points out, Tesla’s approach is in many ways a throwback to the early days of the automobile, when Ford had its own steel mills and rubber plantations. In recent years, conventional auto wisdom has been that manufacturers should focus on design and final assembly and give the rest to suppliers. This strategy has helped reduce how much money big players are tying to factories, but has left them vulnerable to supply chain turmoil.

It also helps that Tesla is a much smaller company than Volkswagen and Toyota, each producing more than 10 million vehicles in a good year. “It’s just a smaller supply chain to begin with,” said Mr. Melsert, now CEO of American Battery Technology Company, a recycling and mining firm.

The Tesla lineup is also more modest and easier to procure. The Model 3 sedan and Model Y sports utility vehicle accounted for nearly all of the company’s sales in 2021. Tesla also offers fewer options than many traditional automakers, which simplifies production.

“It’s a more streamlined approach,” said Phil Amsrud, a senior principal analyst specializing in automotive semiconductors at IHS Markit, a research firm. “They’re not trying to manage all these different configurations.”

Remotely upgradeable Tesla software is considered the most advanced in the automobile business. Even so, analysts say the company’s cars likely use fewer chips, as the company controls functions like battery cooling and autonomous driving from fewer central, on-board computers.

“Tesla has fewer boxes,” said Mr Amsrud. “The less ingredient you need right now, the better.”

Of course, Tesla may still run into problems as it tries to replicate the growth it achieved in 2021 – aiming to increase sales by about 50 percent per year over the next few years. The company acknowledged in its third-quarter report that its creative maneuvers around supply chain chaos may not work very well as it increases production and needs more chips and other parts.

The electric vehicle market is also becoming much more competitive, as traditional automakers respond late with models people want to buy, rather than small electric vehicles that are often made to placate regulators. Ford said last week that it will nearly double production of the Lightning, the electric version of its popular F-150 pickup, due to high demand. Tesla’s pickup truck won’t go on sale for at least another year.

The outlook for traditional automakers will likely improve this year as the scarcity of semiconductors and other components wanes and manufacturers get better at coping.

Tesla vehicles still have quality issues. The company told regulators in December that it plans to: to remember More than 475,000 cars for two separate faults. One can cause the rear view camera to fail, and the other can cause the front hood to open unexpectedly. And federal regulators are investigating the safety of Tesla’s Autopilot system, which can accelerate, brake and steer a car on its own.

“Tesla will continue to grow,” said Stephen Beck, managing partner of cg42, a management consulting firm in New York. But they are facing more competition than ever, and the competition is getting stronger.”

However, the core advantage that allowed the automaker to get through the chip crisis will remain. Tesla produces nothing but electric vehicles and is hampered by habits and procedures made obsolete by new technology. “Tesla started with a clean sheet of paper,” said Mr Amsrud.