The global shortage in semi-conductor chips that has affected production of everything from smart phones to Play Station Games, and some of the world’s biggest car makers, has reportedly caught up with Tesla, forcing the electric car company to close down production for a short period at its Fremont plant.
The semi-conductor shortage, sourced largely from problems at the world’s biggest semi conductor maker, Taiwan Semiconductor Manufacturing Company (TSMC), due to a reported water shortage, and a huge boost in home electronics demand due to Covid, has crippled car production in the US and in Europe and Asia for the last few months.
Ford and General Motors have had to cancel shifts and close down entire factories, according to reports, including Ford at its Kentucky and German factories, Audi in Germany, Toyota in Texas, and Subaru in Japan, while GM is halting production at three factories and Mazda and Nissan have cut forecast output for some vehicles.
The latest to be affected is Tesla, which has suspended production of Model 3 and Model Y electric cars at its Fremont factory, with CEO Elon Musk reportedly citing a “parts shortage”.
“We are experiencing some parts supply issues, so we took the opportunity to bring Fremont down for a few days to do equipment upgrades and maintenance,” Musk told employees in an email, according to Electrek.
“Fremont production is back up and running as of yesterday and will speed up rapidly to full Model 3/Y production over the next few days.” Musk added that the re-tooled production lines for the upgraded versions of the Model S and X is also complete, and more shifts may be added to meet high demand.
But the shortage of “some parts” may be the least of Tesla’s challenges as it seek to ramp up annual production of electric cars from its current level of around 500,000, to between 5 million and 8 million a year by the end of the decade.
A recent analysts note from Morgan Stanley spoke of its ” increasing concern” around a potential battery shortage that could change the shape of many of the growth curves in the market on EV adoption in the coming quarters or years.
“From our perspective, at least, we’d say the chances of there not being a material shortage of battery cell capacity relative to demand is remote,” Morgan Stanley’s Adam Jonas wrote.
This is something thas has been acknowledged by Musk, and the heads of other car makers finally making commitments to stop production of internal combustion engine cars over the next 10 to 15 years, including Ford and GM.
“So the fundamental limit on electric vehicles right now, in general, is total availability of cells, what’s the output of factory cells in gigawatt hours. And you can’t grow faster than that,” Musk has said.
Jim Farley from Ford noted problems in both battery and chip supply. “The next step is going to be a much more aggressive electrification plan, with the subsequent impact on our battery strategy. And we cannot afford to be in the situation we are with semiconductors right now.”
According to Morgan Stanley, the global battery cell capacity will increase tree-fold by 2025 to 1.2 terrawatt hours, but global EV sales are forecast to jump six-fold in the same period to 12 million units.
“Does something have to give?” it asks, and that could become apparent in either a rise in costs, or a fall in volumes. “It looks like the world needs more EV batteries.” Or more innovation in energy density.