It is not that often that one reads about a key supplier that has elected to dismiss a major customer, let alone a customer that has high consumer and industry appeal.  Thus the indication published by The Wall Street Journal today reporting that Mobileye, a key supplier of autopilot technology has elected to part ways with Tesla Motors.(Paid subscription required)

According to the report, the supplier will no longer provide its auto pilot computer chips after the current supply agreement ends because of disagreements about how the technology was deployed.  The WSJ report points to the recent tragic accident involving a driver in Florida whose Tesla autopilot failed to recognize a turning tractor-trailer vehicle, causing a fatal crash. The supplier indicated to the publication that its current system was not designed to always detect vehicles cutting in-front, and that a new software release scheduled for 2018 would be able to do so. The report quotes Mobileye’s Chief Technology Officer indicating that in a partnership, the supplier needs to be there regarding all aspects on how the technology is being utilized.

According to the report, Israel based Mobileye is a current supplier to more than a dozen separate auto producers and that Tesla sales account for about one percent of its current revenues.

Tesla’s CEO Elon Musk indicated in an email to the WSJ that the split would not affect the company’s plan to develop more advanced versions of its Autopilot system and further indicated that the move was expected. Yesterday, the disclosure by Mobileye pushed its stock into a reported decline of 8 percent at the day’ close.

One could certainly speculate whether this announcement is either directly related to pending litigation or whether the partnership was straining for other reasons related to development timetables. However, it is noteworthy when a supplier takes the bold initiative to walk away from one of the most visible automotive industry companies on a global basis, one that is gearing-up to produce upwards of 500,000 electric powered vehicles in the coming few years.

As noted and observed in our prior and most recent Supply Chain Matters commentaries related to Tesla, it adds yet another challenge on the need to develop and nurture a supplier base that can provide continued leading-edge technology and volume requirements that can match Tesla’s timetables and aggressive product development and deployment needs.

Bob Ferrari

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