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Jun 2, 2021

Musk says panic-buying of chips is like the rush on toilet paper

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Elon Musk said the chip shortage is wreaking havoc on Tesla Inc.’s supply chain and blamed companies ordering more microcontrollers than they need, much like consumers hoarded toilet paper in the early days of the pandemic.

“Our biggest challenge is supply chain, especially microcontroller chips. Never seen anything like it,” the chief executive officer tweeted Wednesday. “Fear of running out is causing every company to overorder – like the toilet paper shortage, but at epic scale.”

Musk, 49, said during Tesla’s first-quarter earnings call in April that the chip shortage was a “huge problem” and one of the most difficult supply-chain challenges the company had ever experienced. Last month, the consulting firm AlixPartners estimated automakers will lose about US$110 billion of sales this year due to the dearth of semiconductors, almost double an earlier projection.

Taiwan Semiconductor Manufacturing Co. said last month it plans to increase production of microcontroller units by 60 per cent this year to help relieve carmakers. Still, chip companies, auto manufacturers and their parts suppliers have warned chip supplies will remain tight into next year.

Tesla has been raising vehicle prices because of rising raw-material costs and supply-chain pressures, Musk tweeted earlier this week. The company also elected to remove a lumbar-support feature from the passenger seats of the Model 3 sedan and Model Y SUV, though the CEO said this was related to limited customer usage.

Other carmakers have stripped out features such as navigation systems and blind spot-monitoring mirrors due to the chip shortage.

--With assistance from Debby Wu.