How Tesla reworked its software to survive the chip shortage

Tesla has remained ahead of the ongoing semiconductor chip shortage, but it hasn’t been easy. Beyond securing added suppliers and multiple chip options, Tesla had to rely on its software focus to make alternatives work — which is ultimately why the automaker has weathered the shortage better than others.

In Tesla’s Q2 earnings call, Musk described how the automaker had to rework its software to be compatible with alternative chip supply options, as reported by The Verge. The entire automotive industry is facing chip shortages, but this solution has kept Tesla afloat — while other automakers sink. And it only took Tesla a few weeks to rewrite the firmware, according to Musk.

“We were able to substitute alternative chips, and then write the firmware in a matter of weeks,” Musk said in the call. “It’s not just a matter of swapping out a chip; you also have to rewrite the software.”

Tesla delivered more than 200,000 vehicles in the second quarter, generating $11.9 billion in revenue and $1.1 billion in profit. Meanwhile, automakers such as BMW and Daimler were forced to halt production of some assembly lines due to a lack of semiconductor chips. The move is expected to decrease output by tens of thousands of vehicles.

Even Musk says the industry isn’t out of the woods yet. He described how Tesla’s still dealing with the effects of the shortage, saying that the year’s growth trajectory will be reliant on the the semiconductor situation.

“The global chip shortage situation remains quite serious,” Musk said. “For the rest of this year, our growth rate will be determined by the slowest part in our supply chain.”

Above: Mercedes-Benz CEO predicts chip shortages will continue into next year. Video: CNBC / YouTube

Additionally, it’s more than just a single semiconductor chip that Tesla’s electric vehicles use. Each uses a wide array of chips for everything from seatbelts to airbags. This means that a shortage in any department can affect Tesla’s overall deliveries, as Musk plainly explained in the call.

“A big struggle this quarter was the module that controls the airbags and seatbelts,” Musk said. “And obviously you cannot ship a car without those.”

As to whether the end is in sight for the semiconductor chip shortage, Musk seems optimistic. However, he also admitted uncertainty, emphasizing that it isn’t clear what might happen. And with the shortage entering its third year, it has been anything but predictable.

“It does seem like it’s getting better,” Musk said. “But it’s hard to predict.”

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