Employees work at the Tesla Gigafactory in Shanghai, east China, Nov 20, 2020. U.S. electric car company Tesla built its first Gigafactory outside the United States in 2019 in the new Lingang area, with an expected annual production capacity of 500,000 units.
ding ting | Xinhua News Agency | Getty Images
Under pressure to meet fourth-quarter sales targets while dealing with widespread semiconductor shortages, Tesla decided to remove one of the two electronic control units that are normally included in the steering racks of certain Model 3 and Model Y cars made in China, according to two employees and internal correspondence seen by CNBC.
Tesla did not disclose the exclusion, which has already affected tens of thousands of vehicles shipped to customers in China, Australia, the UK, Germany and other parts of Europe. It was not immediately clear whether Tesla would make similar changes to cars made or shipped in the United States.
The omission indicates that Tesla had to make changes beyond what the company has publicly disclosed to maintain its factories and sales from the final weeks of 2021, as the world faced an ongoing shortage of chips that affected everything from cars to laptops. It also means Tesla can’t turn all of its existing cars into driverless vehicles with a simple software update, which goes against what CEO Elon Musk recently said on an earnings call:
“I personally assume that we will achieve full self-driving this year at a much higher level of safety than a person. So fleet cars essentially becoming self-driving via a software update I think could end up being the greatest increase in asset value of any asset class in history. We’ll see.”
Internally, Tesla employees said adding “Level 3” functionality, which would allow a driver to use their Tesla hands-free without steering in normal driving scenarios, would require the dual-unit system. electronic control unit and would therefore require upgrading during a service visit. They also said the exclusion would not pose safety concerns, since the removed part was considered a secondary electronic control unit, used primarily as a backup.
At the time this manufacturing shift was underway in Shanghai, CEO Elon Musk wrote in a tweet“Oh man, this year has been such a supply chain nightmare and it’s not over!”
Tesla has struggled with manufacturing challenges throughout its history, but the completion of its Shanghai factory in 2019 has helped it increase production, boost margins and gain market share at- beyond North America. This latest move reveals new pressures as the company moves further into the mainstream and aims to deliver on Elon Musk’s promises of a self-reliant future.
Tesla did not respond to requests for comment on this story.
What the omitted part does
The specific item omitted is an electronic control unit in the electric power steering systems, which translates steering wheel movements into street corners.
Before cars used so many electronic components, vehicles relied on a pump, steering rack and pinion to translate steering wheel movements into turns.
Richard Wallace, senior consultant for HWA Analytics in Ann Arbor and a seasoned transportation safety researcher, explains how that has changed.
“There’s always a mechanical component, of course. But in today’s vehicles, when you ‘turn the steering wheel’ you’re providing an electronic signal telling your car to go left or right.”
Electric power steering systems today also enable driver assistance features, Wallace notes, such as the ability to automatically hold a car in the center of a lane.
Tesla removed the component as engineers deemed it redundant, mostly installed as a backup. Omitting the control unit will also save Tesla money in the short term, provided no problems arise as a result of the modified system.
There is precedent for the company removing options or components for commercial reasons. For example, last spring Tesla removed lumbar support from the Model 3 and Model Y passenger seats to cut costs.
On Jan. 26, 2021, Musk said on an earnings call that Tesla faced a “chip hell of many chips” in 2021. The company struggled to get “the little chip that lets you move your seat back and forth,” he noted, along with other “base chips.”
He did not mention modified power steering systems.
Other automakers have taken similar action, but typically make temporary reductions in options that are not part of a vehicle’s base functionality.
For example, in March 2021, General Motors noted it was building some of its 2021 light-duty pickups without a fuel management module, a move that hurt those trucks’ fuel economy. He blamed the token shortage for the move.
Tesla currently offers several levels of driver assistance functionality in its cars. A basic version, dubbed Autopilot, comes with every car. Drivers can also purchase a more advanced version, called Full Self-Driving, or FSD, for $12,000 or $199 per month (in the US).
When Tesla made the decision to exclude an electronic control unit from its steering racks, there was an internal discussion about whether to notify customers, two employees told CNBC. These people asked to remain anonymous because they were not authorized to speak on behalf of the company.
Employees also discussed whether omitting the part would degrade the functionality or reliability of customer cars. They were concerned that “depop” or exclusion of this component would interfere with customers’ ability to use FSD features.
In the end, they decided the tweak didn’t reach the level of customer notification – at least until Tesla was ready to roll out “level 3” or hands-free driving assistance features. .
Tesla vehicles can still use the current “Level 2” versions of its driver assistance systems, Autopilot and Full Self-Driving (or FSD), without the dual-control steering system.
But employees told CNBC that if Tesla rolls out a more sophisticated FSD update, owners of affected cars that use this premium system will need to get a steering rack upgrade from a Tesla service center.
Typically, Tesla relies on service technicians to install missing parts, or to repair or replace broken parts, before a car is delivered to a customer, making service a kind of extended arm of Tesla manufacturing. .
Most cars with the single electronic control unit were initially targeted at customers in China, where FSD is not seeing significant adoption. According to internal communications seen by CNBC, just over 1% of all Tesla customers in China opted for the premium driver assistance package when they placed an order for a new car.
More recently, tens of thousands of affected vehicles have been exported to customers beyond China, including Australia, the UK, Germany and across Europe, employees told CNBC.
CNBC asked Richard Wallace of HWA Analytics if removing an electronic control unit from a power steering system in a modern vehicle could pose a safety risk.
“If something like a chip or an ECU doesn’t provide additional functionality, if it’s really redundant, you might be able to turn it off or leave it out. With chips and software, there’s a bit wiggle room. I can reassign stuff here and there,” he said.
It all depends on a vehicle’s IT architecture, said Phil Amsrud, senior principal analyst at IHS Markit.
He said: “I can’t think of a case where a car manufacturer would say ‘You know what? We are going to remove a component from this module, even if it was there for a good reason and hope nothing happens. Going from a dual-chip variant to a single-chip variant in a vehicle can simplify a system and make it better in some cases. But they would really need to do a lot of validation.
Most automakers would spend 1,000 hours or more testing to make big changes, he estimated. It can take up to four months. It can also take years for quality or safety issues to become clear after changes have been made.
Tesla employees told CNBC that the company spent less than a few weeks discussing the change before moving forward and didn’t view it as a big deal — more of a survival tactic against chip starvation.
The company had already produced earlier models that featured a power steering system with a single electronic control unit, which gave them greater confidence. The same goes for Tesla’s frequently touted ability to push “over-the-air” software updates to vehicles to fine-tune their functionality if needed.