Elon Musk Has A Possible Explanation For Tesla's China Weakness, Flags 'Extreme' Chip Supply Chain Issues

Tesla Inc.'s TSLA domestic sales in China plunged in July and the weakness triggered concerns over the electric vehicle giant's future in its key market.

What Happened: Tesla's CEO Elon Musk doesn't appear to be ruffled by the weak numbers, as evidenced by his reply to a tweet from Tesla bull and ARK Invest founder Cathie Wood regarding China.

Tesla makes cars for export in first half of quarter & for local market in second half.

As publicly disclosed, we are operating under extreme supply chain limitations regarding certain "standard" automotive chips.

Most problematic by far are Renesas & Bosch.

— Elon Musk (@elonmusk) August 12, 2021

The Tesla chief did not specify whether the delivery schedules are the norm for its Gigafactory Shanghai or Fremont facility.

Wood's tweet said that the EV maker has finally come around to understanding the Chinese government will put its weight behind homegrown companies such as EV startups Nio Inc - ADR NIO, XPeng Inc - ADR XPEV and Li Auto Inc LI.

All of the Chinese EV makers turned in strong performances in July. Wood, however, expressed happiness at Tesla delivering high-quality vehicles to the Europeans whose standards for fit-finish design are quite high.

Related Link: Tesla Analyst Upgrades The EV Maker's Stock And Ups Price Target By 20%: Here's Why

Musk Warns of Chip Crunch: In the same tweet, Musk also said Tesla is operating under extreme supply chain limitations regarding certain "standard" automotive chips.

The CEO said he has been having the most issues with Japanese chipmaker Renesas Electronics Corp RNECY and Germany's Bosch.

Renesas' facility in the Naka city of Japan was ravaged by a fire in mid-March that severely impaired manufacturing. It took until July for the company to bring back lost production online. In late July, while reporting its half-yearly results, the company warned that chip shortage will persist through mid-2022.

Related Link: Tesla's FSD Could Alone Be Worth Much More Than The EV Giant's Current Market Cap In a Decade: Analyst

Photo: Courtesy Tesla