Tesla’s ‘Supply Chain Nightmare’: Chip Shortage Prompts Removal Of Steering Component In Some Cars

Tesla (TSLA) seemingly hit a snag when it came to dealing with the microchip shortage that is plaguing the auto industry, prompting it to remove one of the two electric control units that are equipped in the steering racks of some of its cars.

The modification affected its China Model 3 and Model Y cars and was part of an effort to help the automaker hit its Q4 sales goals as the chip supply shortage put pressure on production, sources from the company told CNBC.

A semiconductor chip shortage has been challenging automakers across the globe, forcing them to cut production as they try to align vehicle schedules with parts supplies.

Amid the pandemic, demand for chips grew as consumers scooped up tech products, diverting supplies of the component. The shortage has affected several industries, including the tech market.

According to the report from CNBC, Tesla did not disclose the removal of the steering component, which is estimated to affect tens of thousands of vehicles that have shipped to customers in China, Australia, the U.K. and Germany, as well as other parts of Europe.

It was unclear from the report whether any U.S. vehicles are affected by the part removal.

Tesla CEO Elon Musk seemed to acknowledge the chip shortage challenges in a tweet, saying, “Oh man, this year has been such a supply chain nightmare & it’s not over!”

The removal of the steering component may become an issue down the road as Tesla looks to make all of its cars driverless through software updates. Making that transition would require a retrofit through a service visit, the employee sources told CNBC.

However, the retrofit option undermines comments made by Musk in an earnings call, where he recently said, “My personal guess is that we’ll achieve Full Self-Driving this year at a safety level significantly greater than a person. So the cars in the fleet essentially becoming self-driving via software update, I think, might end up being the biggest increase in asset value of any asset class in history. We shall see,” CNBC reported.

The removal of the steering component from the vehicles is not considered a safety hazard as it was a redundant part that acted as a backup.

Tesla is not the first automaker to remove components from its vehicles due to the chip shortage.

In November, GM stopped offering heated and ventilated seats as standard and optional equipment on some vehicles due to a lack of chips. This was in addition to offering heated steering wheels on some models due to the chip disruption.

In March, GM also said it would eliminate the fuel management module on some of its Chevy Silverado and GMC Sierra light-duty pickup trucks – also due to chip supplies. The fuel management module improves fuel economy in the vehicles by 1 mile per gallon, CNN reported at the time.

In its latest earnings report, Tesla addressed the supply chain challenges, saying, “The rate of growth will depend on our equipment capacity, operational efficiency and the capacity and stability of the supply chain.

“Our own factories have been running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022.”

Musk said at the time that he foresees the supply chain challenges alleviating by the end of 2022 or early 2023.

As of Tuesday premarket hours, shares of Tesla were trading at $907.58, up 23 cents, or 0.03%.