Trying to make sense of all this.
1. You don't spend $$$ billions building new factories not to use them. Legacy OEMs are temporarily closing plants while Tesla is making record deliveries. The difference is LOEMs outsourced most of their parts decades ago, Tesla chose to vertically integrate. This is the reason why Tesla moved 241k cars in the 3rd quarter while LOEMs were all down in deliveries. Because it makes so many of the parts internally, Tesla has managed to avoid many of the problems LOEMs are having. For example, Tesla makes its captain chairs internally; companies like Ford most likely don't.
2. As reports of missing USB ports, Tesla scrambling to secure different types of microchips and such surface, it has become clear that even Tesla is not immune. While Tesla makes most of the components going into its cars, it can't and doesn't make all (i.e. USB ports).
3. Why did Tesla push the six seaters? It could be nothing more than greed, but unlikely. I think it's because they have the captain seats; they don't have the bench seats for the 2nd row in 5/7 seaters because those are still outsourced. I've seen a report that Tesla can't get the bench seats from its supplier.
4. All car manufacturers are raising prices. A 60 Minutes story last Sunday pointed out why. It's complicated, but the fact is shipments from Asia are piling up at our ports, LA in particular, Chicago inland at the rail yards. The shipping companies are using this to gouge customers. One frustrated retailer said delays are 9 weeks or longer than normal. To make matters worse, the shipping companies are charging customers to store containers with their goods inside. One guy said that shipping his shipping cost has gone from $3k to get a container shipped and delivered to $20k/$30k.
IT'S THE SUPPLY CHAIN, STUPID! (Paraphrasing the old Clinton campaign axiom, not meant as an insult to anyone).
5. Why doesn't the federal government fix this? It can't because it has little authority/leverage to do anything about it. Ports are owned by local governments, it's the LA Port Authority, not the U.S. Port Authority, for example. The rest of the snafu is free enterprise at work. Private shippers/railroads are using this to gouge their customers (the Fords, Teslas, Targets and Amazons of our economy). They're charging 10-15 times as much to deliver a container as the norm because they can get away with it. The Biden administration has assembled a task force to try and mitigate the problems, but there is only so much they can do. (For example, they jawboned the LA Port Authority into going to 24/7 operations, but that is about the extent of what they can do). The feds can't force the shipping companies to keep prices at normal rates and to stop adding insult to injury by charging customer for storing containers they refuse/are unable to deliver. It would take Congress to pass legislative measures and we know how likely that is to happen with that bunch.
6. The pandemic has had a devastating effect. A parallel: When WWII ended, there was a demand surge that caused temporary inflation. GM, Ford, etc had spent 4 years building tanks and planes. Our parents/grandparents had trouble buying a new car. When the war ended, the OEMs had to shift back to peacetime production and that took time. Demand spiked because 15 million people left the armed forces, came home and wanted to resume their lives. Grandpa wanted that new car to replace the clunker he had been nursing for several years. Prices spiked for a couple of years. (Republicans blamed it on the Democrats who had been running the government since 1933 and swept to huge victories in the 1946/48 House/Senate elections). We're seeing this now as demand spikes as the world starts to emerge from the COVID pandemic. The inflation spike is global, not just limited to the U.S. We may be feeling it more, but that's because our economy is so large and a higher percentage of our population is vaccinated. Our economy is actually booming and demand is being hit in the face by supply. When the winter COVID spike comes, we'll get hit and so will western Europe, but less hard than Eastern Europe, Asia and the developing world where vaccination rates are much lower.
7. Why are oil companies raising prices then? They move oil through pipelines. Well, they still ship it around the world on huge tankers, we're still a net importer, and just because that's what oil companies do. They raise prices on any pretense and have done so my entire life and that's longer than I care to admit. Anyway, aren't we all trying to get away from the oil companies?
WHY IS TESLA RAISING PRICES?
8. Because their shipping costs have gone up like everyone else's.
9. To try and tamp down demand. The supply chain shortage came at the worst time for Tesla. We've hit the inflection point on EVs, they're finally going mainstream. Tesla needs its two plus Austin and Berlin to be churning out new cars ASAP to satisfy exploding demand but can't because there aren't enough chips, USB ports, bench seats, etc available to make the vehicles.
10. One way to tamp down demand is to charge more. Tesla has raised the prices on all its models $10-15k over the past year. It hasn't slowed demand. Tesla is now sold out all the way through 2022. The EV revolution is here.
11. Again, Tesla is more but not totally immune to supply chain shortages hitting legacy OEMs.
WHY THE HELL DON'T THEY TELL US WHAT'S GOING ON?
12. One, it's Tesla. They've always been secretive when it comes to production, etc.
13. They don't know either. Take USB ports. Those are probably made in China. Tesla likely has a container or 12 sitting on the docks in LA. They know they're there but have no idea when they will be delivered. How can they supply you or me with a VIN, set a delivery date and come to find out that the USB port container won't arrive until two weeks after we're supposed to take delivery?
14. When the supply chain problems unsnarl it will get better, but it's going to take a while.
One other point made in the 60 Minutes story by someone interviewed: A Chinese port is spending $20 billion to upgrade one port. The Infrastructure Bill that just passed Congress has a provision to spend $16 billion to upgrade/expand ports for the entire U.S. The interviewee said that's welcome, but more is needed. This isn't political, but an observation: Circa 1900, Great Britain was the manufacturing behemoth of the world. They made most everything. Then, they decided to rest on their laurels and stopped investing in new plants, transportation, etc. By 1940, the U.S. had supplanted them. It's a bad idea to stand still as Tesla is proving to the world with the way it is revolutionizing manufacturing.
My $2.02 for the day.
posting on TMC.
