Please ensure Javascript is enabled for purposes of website accessibility

Tesla Supply Chain Problems Spark Consumer Complaints in China

By Rich Smith - Mar 3, 2020 at 5:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

HW 3.0, HW 2.5 -- is this really a big deal? To Chinese buyers, it is.

Coronavirus may be starting to infect Tesla's (TSLA 4.53%) supply chain in China. 

This afternoon, Beijing-based media company Pandaily reported that complaints are surfacing on Weibo chatboards -- and even being phoned in to the Chinese national consumer rights hotline "12315" -- regarding Tesla Model 3 sedans being delivered to consumers with downgraded parts under the hood.

Tesla Model 3

Image source: Tesla.

Specifically, consumers allege that Tesla has been delivering Model 3s, which were supposed to be equipped with "HW 3.0" vehicle controllers (the hardware used to facilitate full self-driving, or FSD, capability), with HW 2.5 controllers installed instead.

In 2019, Tesla made the switch to version 3.0 hardware, equipped with a self-designed FSD, as an upgrade to enable the full suite of self-driving capabilities permitted by Autopilot. In contrast, HW 2.5-equipped Teslas use a chip bought from NVIDIA. According to the company, its self-developed chip can process images provided by the cars' sensors as much as 21 times faster than the NVIDIA chip.

Tesla quickly acknowledged the switch in its own statement on Weibo, blaming supply chain issues caused by the coronavirus for its decision to substitute the older chip. "Our original intention is to do our best to meet the needs of consumers' safety and use," the company explained," but also "to ensure timely delivery." As a compromise, the company elected to include HW 3.0 controllers only in cars ordered with the full self-driving option paid for, and put HW 2.5 in the other cars when needed.

Tesla assured its Chinese customers that it plans to retrofit HW 2.5-equipped cars with HW 3.0 controllers "as production capacity and supply chains recover."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$737.12 (4.53%) $31.91
Weibo Corporation Stock Quote
Weibo Corporation
$23.82 (2.50%) $0.58

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.