Recently, Nikkei Business Publications commissioned a complete teardown of a Tesla Model 3. What they found astonished them and caused them to declare that Tesla is at least 6 years ahead of the competition. What’s more, other automakers may never be able to catch up without major disruptions to their supply chains. The reason? That would be the full self-driving computer — known as Hardware 3 — engineered and manufactured by Tesla. According to Asia Nikkei News, they shared their findings with an engineer employed by a major Japanese automaker who exclaimed, “We cannot do it!”
What is it they cannot do? Can they not create a compact water cooled computer that not only controls all the functions needed for a car to drive itself but also control all the functions of a full featured infotainment system as well? Certainly they can do that. What that Japanese engineer was saying was not that his company couldn’t replicate the Tesla HW3 computer — given sufficient time and resources — but that doing so would create a massive disruption of its supply chain.
All other companies use multiple electronic control units — some have 20 or more. Tesla uses one. Automakers worry that computers like Tesla’s will make the supply chains they have cultivated over decades obsolete. Tesla is not shackled to outside suppliers and so it is free to pursue the best technologies available. Put another way, the supply chains that have helped today’s auto giants grow are now beginning to hamper their ability to innovate, Asia Nikkei says.
Oddly enough, when Tesla was just getting started in the automobile business, many suppliers refused to do business with it, fearing that a startup that was on shaky ground financially might not he able to pay its bills. Many also found Tesla’s requirements for components weird. The company didn’t want to use just off the shelf stuff. They wanted components designed to their specifications. Suppliers worried that if they invested the time and money necessary to meet Tesla’s expectations, there would not be enough volume to make doing so profitable and so they took a pass. That in turn forced Tesla to build many components itself. Now the decision not to engage with Tesla a decade ago may result in many of those suppliers going out of business.
The problem is similar to the other conundrum traditional automakers face — how to continue being profitable while they slowly transition to making electric vehicles. Tesla does not have that problem since it never built conventional cars in the first place. It’s one thing to say all established car companies should simply transition more quickly to EVs, but what about the ripple effects of doing so? Who pays the employees who get laid off as a result? What becomes of the suppliers who depend on car companies for their livelihood? For every autoworker on the assembly line, there are up to 6 more whose jobs are dependent on supporting the production process. Tesla has created an earthquake that will shake the auto industry to its very foundations.
That HW 3 computer is composed of two 260 mm square artificial intelligence chips developed by Tesla — one for autonomous driving functions and the other to control Tesla’s advanced infotainment system which manages virtually all of the car’s functions from heating and cooling to windshield wiper speeds to making fart noises. A liquid cooled heat sink is installed between the two boards. The software to control both chips was developed internally by Tesla as well.
“From software to electric drive systems, Tesla is steadily bringing more development tasks in-house,” says Asia Nikkei. “If this strategy succeeds, competitors will have little choice but to follow suit, upending their old business models and supply chains as they try to overcome Tesla’s head start.” Industry insiders expect such technology to become widely available by 2025 at the earliest. In theory, there should be nothing preventing Toyota or Volkswagen from creating similar AI computer systems earlier than 2025 considering their immense financial resources and vast talent pools, except for the issue of reconfiguring their long standing working relationship with their supply network.
Of course, it is one thing to say other manufacturers could catch up to Tesla in about 5 years time, but Tesla won’t be standing still in the meantime. Its business plan from Day One has been to disrupt the auto industry in order to drive the EV revolution forward at maximum speed. If others are left panting in its wake, so be it.
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