Musk: Tesla's 'Biggest Challenge' Is Supply Chain, Says It's Short-Term Issue

Tesla, Inc. TSLA CEO Elon Musk, who has flagged supply chain issues as the main reason behind the automaker's recent price hikes, has reiterated this on Twitter.

On a positive note, Musk said the issue is transitory.

What Happened: Twitter user Pierre Ferragu, who is an analyst at New Street Research, pointed out that Tesla is shipping cars from China to Europe and increasing prices in the U.S. His take on the scenario is that strong underlying demand in the U.S. is forcing price hikes and preventing exports.

Musk replied that the biggest challenge is the supply chain, especially for microcontroller chips, adding that he's "never seen anything like it."

Our biggest challenge is supply chain, especially microcontroller chips. Never seen anything like it.

Fear of running out is causing every company to overorder – like the toilet paper shortage, but at epic scale.

That said, it's obv not a long-term issue.

— Elon Musk (@elonmusk) June 2, 2021

Related Link: Elon Musk Says Tesla EV Price Hikes Happening Due To Supply Chain Issues

Why It's Important: A microcontroller is a compact integrated circuit designed to govern a specific operation in an embedded system.

Tesla said in its first-quarter earnings call that it was able to navigate the global chip supply shortage by "pivoting extremely quickly to new microcontrollers, while also simultaneously developing firmware for new chips made by new suppliers."

Tesla's rival in China,  Nio, Inc. NIO, said Tuesday that its deliveries in May were hit by the chip crunch.

Chipmakers have responded to the crisis by adding capacity. Taiwanese foundry Taiwan Semiconductor Manufacturing Company Limited TSM has increased capital spending to install additional capacity.

Japanese chipmaker Renesas Electronics Corp RNECY, which faced production disruption due to a fire in March, said full capacity will come back online by mid-June.

At last check Wednesday, Tesla shares were down 3% at $605.17. 

Related Link: BofA Cuts Tesla Price Target By $200, Predicts Another Equity Offering

Photo courtesy of Tesla.