Tesla Gets Desperate To Secure Chips While GM’s Bottleneck Eases

Tesla (TSLA) is reportedly taking unusual steps to get around a global chip shortage that has shuttered auto plants, while General Motors (GM) has seen its supply crunch ease enough to reopen some plants soon. Tesla stock and GM stock rose.


The EV maker is ready to pay in advance for chips to ensure it has enough of the crucial material, sources told the Financial Times. Tesla is even considering buying a chip plant, although sources say that’s not likely to happen anytime soon, given the high cost and complexity of such a strategy. Experts estimate it would require an investment of up to $20 billion.

Tesla is in discussions with chip suppliers in Taiwan, South Korea and the U.S. The newest generation mass-production chips Tesla needs are made mainly in Taiwan and South Korea.

In the most recent earnings call, CEO Elon Musk compared the chip shortage to wartime shortages. At the time, he boasted about finding a way around the problem by “pivoting extremely quickly to new microcontrollers, while simultaneously developing firmware for new chips made by new suppliers.”

To deal with the global chip shortage, some chipmakers have begun contracting with large customers to pay deposits upfront to guarantee orders at a fixed price. This is an unusual arrangement, since the flexibility to allocate capacity to orders from different customers is more profitable.

In a similar move to head off battery supply issues, Tesla has already said it plans to make some of its own batteries. It also has an in-house engineering team to design high-end semiconductors used in autonomous driving.

Meanwhile, GM said Thursday it plans to reopen five plants next week that were idled earlier due to the chip shortage.

GM said its “supply chain organization continues to make strides working with our supply base to mitigate the near-term impacts of the semiconductor situation.”

More GM plants will open in June.

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Tesla Stock

Shares rose 1.2% to 626.69 on the stock market today. Tesla stock, which has bounced off its 200-day line, is still trading below its 50-day line, according to MarketSmith chart analysis. 

GM stock rallied 4%. Ford (F), which announced on Wednesday it will boost EV spending further, jumped 5.6%. Volkswagen (VWAGY) climbed 2%.

Meanwhile, the Senate advanced legislation on Wednesday that would boost electric-vehicle tax credits up to $12,500 for EVs that are assembled by union workers in the U.S.

The bill would limit tax credits to vehicles with a retail price below $80,000. The current maximum tax credit is $7,500 with no maximum price. Current tax credits phase out for individual automakers once they hit 200,000 total EVs sold. Both GM and Tesla have hit the cap and no longer qualify for the tax credit.

The “Clean Energy for America” bill would remove the existing EV cap, while the credit would phase out over three years once 50% of total U.S. passenger vehicle sales are EVs.

The proposal would increase the tax credit to $10,000 for vehicles assembled in the U.S., with another $2,500 for cars assembled by union workers.

As a result, Tesla, Volkswagen and others who don’t have unionized workers in the U.S. would get smaller credits.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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