Chip Shortage in Automobile Sector is Toilet Paper Crisis on Epic Scale, says Elon Musk

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Due to the ongoing coronavirus pandemic, snowstorm in Texas and other reasons several automobile companies are facing chip shortage. Replying to a tweet this week, Tesla and SpaceX CEO Elon Musk blamed the shortage of microcontroller chips for the rising price of its Model 3 and Model Y vehicles.

Musk tweeted in his reply on Wednesday that Tesla’s biggest challenge at the moment is the supply chain, especially microcontroller chips. He went on to say that he had never seen anything like it. Explaining the scenario faced by the automobile manufacturers, Musk said that the fear of running out of chips is causing every company to overorder just like how many people fell for the faux toilet paper shortage last year when the coronavirus pandemic broke out. The scale of hoarding and over-ordering microcontroller chips is at an “epic scale,” mentioned Musk in his tweet. However, Musk has assured that this is not a long-term issue.

According to a report by Electrek, the Standard Range Plus version of the Model 3 has increased this year from $36,990 in February to $39,990 in late May. Over the same period, the Model Y Long Range AWD version has gone from $49,990 to $51,990. The report mentions that Tesla has updated its prices almost six times since February this year.

It is not just Tesla that is affected by the global shortage of microcontrollers chips. The raw item is used in several electronic items from toasters to gaming consoles. However, the automobile sector has suffered the most due to it. Some of the car manufacturing units also had to temporarily shut down after their demand for raw items like chips, semiconductors were not met. This comes at a time when demand for vehicles is high around the globe.

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According to a report by the Wall Street Journal, some of the main causes for the supply of semiconductors to disrupt were the severe weather conditions in Texas where Samsung Electronics Co. one of the world’s biggest chip makers, operates two factories. Another cause was the massive fire at Japan’s Renesas Semiconductor Manufacturing Co. Ltd. in March that had to stop production. These two incidents left car makers searching for chips.

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