How long can Tesla, which is obsessed with self-produced chips, last?

3 minutes, 28 seconds Read

Tesla Inc. has long been considered a leader in the self-driving movement, at least in terms of tangible products already on the road.

The automaker first rolled out Autopilot in October 2014, and after trials, it’s not fully self-driving, so to speak, an assistance feature. That means Tesla expects drivers to still keep their eyes on the road and keep their hands on the wheel while driving.

Now, Autopilot is considered a secondary driving feature. The equipment that currently powers Tesla’s self-driving platform is made by Nvidia.

However, Tesla has made it clear that it wants to be able to build its own chips to fulfill its self-driving ambitions. That’s why it poached Jim Keller from AMD two years ago. Before that, Keller was instrumental in developing the A4 and A5 processors for Apple.

For the past two years he was a vice president at Tesla and the leader of the Autopilot platform. Last Tuesday was Keller’s last day at Tesla, another key departure for the automaker this year. Pete Bannon will take over Autopilot’s hardware program, while Andrej Karpathy will be in charge of the self-driving software.

Tesla’s autonomous driving strategy

What I have been unable to understand is why Tesla felt that it should build its own hardware, and while the current products in use are not tailor-made for Tesla, they perform quite well, especially Nvidia’s products.

Nvidia can be a leader in the autonomous driving movement.

In the speech of Nvidia founder and CEO Huang Renxun, it is clear how much energy and money the company has devoted to its products.

At present, Tesla’s funds are not abundant. The production woes the company is facing underscore the financial stress the company is going through, and while Chief Executive Elon Musk has forecast profitability and positive cash flow for the third and fourth quarters, it’s not yet clear what that means. Whether the automaker can achieve this goal.

In fact, it appears to be a long stretch. And for Tesla, short-lived profitability doesn’t help, as it is saddled with $11 billion in debt and is currently generating negative free cash flow. The company’s recent hiring spree on the production line could also be a drag on the company’s gross margin, which won’t help the company financially, although production targets are likely to be met.

Sorry I digressed.

So what is the situation Tesla is facing now? It’s hard to say what it will do now. Keller’s absence doesn’t mean the company is giving up on making its own chips, though it’s still unclear to me why it’s pushing ahead. It will cost hundreds of millions of dollars to develop these chips, and possibly much longer. Does Tesla think it has something that other industries don’t?

That’s the only explanation I can think of. Like the production line, perhaps the best thing to do is for Tesla to admit that it made a mistake.

Just to clarify, I’m not saying it’s a bad idea to press and hold and see if it produces better results. I just don’t think it’s a good idea to invest huge amounts of money in this project, especially when Tesla is short on funds and Nvidia has almost created a strong self-driving ecosystem.

It’s like Tesla making its own tires, or smelting its own aluminum, which is useless. To build a car it should be:

A + B + C = D; sell it to E and get F’s profit.

Easier said than done – we’re not saying building a car is easy. But Tesla has no reason to make it harder.

An automotive consultant recently tore down a Model 3. He loves the car, but he thinks Tesla got it all wrong. Had it teamed up with a single manufacturing contractor, the automaker could have crushed its rivals with the Model 3 and “knocked them all out.”

The same goes for self-driving hardware. Nvidia is the best, and Tesla can use it to build the best hardware products. And the self-driving software is what it should be doing, and stop trying to beat Nvidia at its own game.

This is futile. Even if it works, it’s not clear that it’s worth the time or money invested.

Similar Posts