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Tesla is growing while auto production around the globe plummets.

Kena Betancur /AFP via Getty Images


Tesla

is growing while other auto makers are struggling to build cars due to a shortage of microchips. How come?

The data is easy to grasp even if the reason for the results remains mysterious.


General Motors

(ticker: GM) U.S. dealers delivered 446,997 vehicles in the U.S. in the third quarter of 2021, down 218,195 units, or almost 33%. Tesla (TSLA) delivered 241,300 vehicles in the third quarter, more than investors expected and up about 73% compared with the third quarter of 2020.

Tesla investors expected growth and got it. For GM, it was a steep drop, but not an unexpected one. GM warned investors in the middle of the quarter unit shipments would be down about 200,000 units. The chip shortage is the reason GM management saw the drop coming. A global shortage of automotive semiconductors has roiled the industry all year and will end up trimming global light vehicle production by about 5 million to 6 million units.

For Tesla, the third quarter was another record. The company has delivered about 627,000 vehicles in the first three quarters of the year, up almost 100% compared with the first three quarters of 2020. Tesla is, essentially, running at full capacity while other auto makers shut plants due to lack of parts.

Demand, profits, and industry size might be three reasons for the Q3 conundrum.

Demand for all cars in 2021 is strong, but demand for EVs around the world is exceptional. Chinese EV sales through August are up about 220% year over year, according to Citi analyst Jeff Chung. And EVs tend to be higher priced vehicles than traditional cars in comparable vehicle segments. What’s more, EVs are still a small portion of the overall global total of new vehicle sales. Taken together, these could be reasons chip makers are sending more chips, relatively speaking, Tesla’s way. It’s simply easier and more profitable to supply EV makers.

There are a couple of other reasons, though.

Supply chain is one. “Tesla has a more efficient supply chain,” Wedbush analyst Dan Ives tells Barron’s. What’s more, Ives points out that Tesla makes vehicles in only two facilities right now: Fremont, Calif. and Shanghai, China. He believes Tesla is having better luck sourcing chips in China. “


Ford

and GM among others have very complex supply chains which put them in the eye of the storm,” he explains.

Geography is another. Chinese EV makers had a good month of September. The chip shortage, in China, wasn’t as acute as it has been in prior months.


NIO

(NIO),


XPeng

(XPEV), and Li Auto (LI)—three U.S.-listed Chinese EV makers—delivered more than 28,000 vehicles in September. That’s a record month for the three and up from just about 10,000 vehicles in February 2021 when the Chinese Lunar New Year and the chip shortage impacted results.

Chinese-based production seems to have helped Tesla. And more plants and added complexity could be hurting others. But the chip shortage seems to be hitting different auto makers at different times as chip makers struggle to fill orders. Timing is the final potential reason.

GM had a bad quarter, but others were OK. In the U.S., sales at Toyota’s Lexus division, Hyundai,


Kia
,


BMW
,
and a handful of other auto makers were all up year over year, Benchmark analyst Mike Ward tells Barron’s “despite the market [being] down 13%.”

Tesla bulls and bears should probably give some credit to Tesla too.  It has been using different chips and rewriting software code. That’s another, company specific issue for Tesla’s relative success. “It’s not just a matter of swapping out a chip. You also have to rewrite the software,” said CEO Elon Musk on the company’s second quarter earnings conference call. “It was an incredibly intense effort of finding new chips, writing new firmware, integrating with the vehicle and testing in order to maintain production.”

The good news for GM and others is it does seem that are things are getting better. “The semiconductor supply disruptions that impacted our third-quarter wholesale and customer deliveries are improving,” said Steve Carlisle, executive vice president and president, GM North America, in a company news release. “As we look to the fourth quarter, a steady flow of vehicles held at plants will continue to be released to dealers, we are restarting production at key crossover and car plants, and we look forward to a more stable operating environment through the fall.”

More stable production is what all automotive investors hope for too. Tesla investors, however, will be looking for more growth. Analysts currently project about 230,000 Tesla vehicle deliveries for the final three months of the year. After the third-quarter number, Tesla investors will expect more than that, chip shortage or no chip shortage.

Tesla stock is up after reporting strong deliveries Saturday. Shares were at almost $800 in premarket trading, up about 3%. Shares closed up 0.1% on a rough day for markets. The

Nasdaq Composite
fell 2.1%. The

S&P 500
and

Dow Jones Industrial Average
dropped 1.3% and 0.9%, respectively.

Write to Al Root at [email protected]

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