Tesla requires US supply chains to strip out China-made components – report

Core Viewpoint - Tesla is shifting its supply chain strategy to reduce reliance on Chinese components for vehicles destined for the US, driven by deteriorating US-China relations and supply chain vulnerabilities exposed during the Covid-19 pandemic [1][2][3]. Supply Chain Strategy - Tesla has instructed suppliers to avoid using components manufactured in China for US-assembled vehicles, with plans to eliminate remaining China-origin components within the next two years [1][2]. - The company has already replaced some China-made parts with components from other countries, and several China-based suppliers have relocated production to countries like Mexico [2]. Geopolitical Context - The shift in supply chain strategy has been accelerated by US tariffs on Chinese imports and recent geopolitical tensions, particularly between China and the Netherlands, which have disrupted chip supplies [3]. - China has also imposed export restrictions on certain rare earths and magnets critical for vehicle production, further complicating access to necessary components [3]. Production Footprint - Tesla's production is geographically split, with US vehicles built at local factories using domestic supply chains, while cars from the Shanghai plant primarily rely on locally sourced parts for markets in Asia and Europe [4]. - The Shanghai factory collaborates with approximately 400 direct Chinese suppliers, over 60 of which contribute to Tesla's global production [4]. Battery Supply Challenges - The company faces challenges in substituting lithium-iron phosphate (LFP) batteries, previously sourced from China's Contemporary Amperex Technology (CATL), which are no longer eligible for specific EV tax credits and are subject to US tariffs [5]. - Tesla is pursuing domestic LFP production, with plans for a facility in Nevada to begin operations in the first quarter of 2026 [6]. Future Plans - Tesla's CFO has indicated that the company is working on producing LFP cells in the US and securing additional suppliers outside of China, acknowledging that this transition will require time [6].