Tesla Record Deliveries

Key Takeaways

• Tesla beats analyst expectations delivering nearly double the vehicles in 2021 than it did in 2020.
• Other auto companies are now copying Tesla’s vertically integrated model to become their own suppliers in key areas such as battery production.
• To handle semiconductor shortages, automakers have chosen to partner with larger processor manufacturers such as Taiwan Semiconductor.

Apparently, Tesla (TSLA) hadn’t impressed us enough in 2021.

Shares rocketed almost 10% higher as the company delivered record vehicles in 2021.

Time To Dominate

In Q4, Tesla delivered 308,600 hitting 936,172 vehicles for the year, an 87% rise year-over-year.

Wall Street anticipated 267,000 for Q4 and 897,000 for the year.

The deliveries solidified Tesla’s spot as the dominant electric vehicle manufacturer.

Copy Cat

Tesla struggled with supply issues far less than other auto manufacturers.

How?

Years ago, Musk knew he needed to vertically integrate parts of the supply chain in order to feed the manufacturing process.

For Tesla, that meant becoming its own battery manufacturer while developing a core competency in programming microprocessors. 

Volkswagen (VOW) and General Motors began to spend heavily on joint-ventures to shore up their own supply of electric-vehicle batteries.

As noted in a Wall Street Journal article, automakers used to pit suppliers against one another to get better pricing. That works great when there are plenty of companies. But with few battery manufacturers, it makes more sense to become your own supplier.

As your own supplier, an auto company risks lower margins entering a business that isn’t their core competency. But, they get a more stable supply.

That said, most are choosing to go the joint-venture route, leveraging the expertise of a partner as well as another company’s capital.

However, it’s very unlikely automakers ever get into the semiconductor manufacturing industry given the cost of a new factory runs +/- $5 billion.

Instead, companies like Ford chose to partner with GlobalFoundies to create a strategic partnership.

The Bottom Line: Car companies will need to spend capital in the coming years to redo their supply chains. In the short-term, that could compress margins and cash flow.

However, it’s both necessary and appropriate for their survival.

We’ll be looking to see how much General Motors, Ford, and Toyota put towards electric-vehicles development.

Their partners also become interesting investments such as GM and Qualcomm (QCOM) and Taiwan Semiconductor (TSM).