Tesla cancels axle-drive pump orders for the Model 3 ahead of the vehicle’s production

Published By: Angela Campbell on January 27, 2017 12:01 pm EST

After revealing the accelerating production plan for the Model 3 – the “Build Plan” – last May, Tesla Motors Inc. (NASDAQ:TSLA) CEO Elon Musk announced a rigorous sourcing program both internally and for suppliers in order to achieve a deadline of July 1, 2017 for the Model 3 parts.

Yesterday, Electrek reported that one of the Model 3 suppliers has fallen victim to the stringent sourcing program, as the automaker cancelled a large order. SHW Automotive GmbH, a German auto-parts firm, announced earlier this week that an EV manufacturer cancelled an order for axle-drive pumps worth €100 million ($107 million), as it “failed to meet its requirements.”

While the customer’s identity was not revealed, Tesla is likely the only car company which plans to build cars in that massive scale over the coming months. Additionally, a source close to the order told Electrek that the EV company was indeed Tesla which ordered the Model 3 parts in September 2016.

Tesla was reportedly discontent with the quality of those axle-drive pumps. However, the supplier does not agree with the automaker and plans to seek damages for canceling the order. Interestingly, when it was being speculated that the customer was Tesla, the German media suggested that the cancellation could have been due to pressure from the Trump administration to support local manufacturing and risk of higher border taxes.

Insiders from SHW and sources close to the matter reportedly said that the problem was not contractual or technical; it was merely political, as there was no indication of order cancellation.

However, Tesla had a perfect response for all the speculations and accusations; its spokesperson said: “The main reason why we now confirm that we canceled the order is to counter those utopian claims‎ that we were acting in response to political pressure. The fact is the order was canceled because technical standards weren’t complied with.”

Currently, there is no clarity on whether the order cancellation would have any impact on the Model 3 production plan scheduled for this summer or the launch timeline of second half of the year. Tesla could either bring the production of axle-drive pumps in-house, something it has done previously, or quickly find a new supplier who is willing to step up for the challenge.