Tesla is directing suppliers to exclude China-made components from vehicles built in the United States, according to reports. The company has already replaced some parts and plans to complete the transition within one to two years. This move accelerates amid escalating US-China trade tensions.
Tesla has decided earlier this year to stop using Chinese suppliers for its US-built vehicles, as reported by the Wall Street Journal citing sources familiar with the matter. The electric vehicle maker and its suppliers have replaced some China-made parts with components manufactured elsewhere. Sources indicate Tesla aims to switch all remaining components to non-China sources within the next one to two years.
The effort to reduce reliance on Chinese parts began during the Covid-19 pandemic but gained pace this year following US President Donald Trump's imposition of steep tariffs on Chinese imports. Tariff fluctuations during the US-China trade war have created uncertainty, complicating Tesla's pricing strategies. Recent disruptions in automotive chip supplies, stemming from disputes between China and the Netherlands, have further intensified discussions within Tesla to accelerate diversification.
The United States remains Tesla's largest market, with China as the second. Tesla operates its largest factory globally in Shanghai, where over 95 percent of components are sourced locally from more than 400 Tier 1 suppliers, over 60 of which are integrated into its global supply chain, per a November 26, 2024, report by Shanghai Securities News.
This strategy aligns with broader industry trends. General Motors executives have advised suppliers to seek raw materials and components outside China, aiming to fully relocate supply chains away from the country. Reuters reported on November 12 that GM set a 2027 deadline for certain suppliers to end China sourcing ties, with directives issued at the end of 2024 and urgency increasing this spring amid the escalating trade war.