- Tesla and its suppliers have replaced some China-made parts with components made elsewhere for cars built in the US, according to the Wall Street Journal.
- Earlier this week, Reuters reported that General Motors executives have been advising suppliers to seek alternative sources for raw materials and components outside China.
Tesla (NASDAQ: TSLA) is reportedly asking its suppliers to exclude China-made parts when producing US cars, becoming the latest US automaker to do so after General Motors (NYSE: GM).
Earlier this year, the company decided to stop using Chinese suppliers for Tesla vehicles made in the US, the Wall Street Journal reported today, citing people familiar with the matter.
Tesla and its suppliers have already replaced some China-made parts with components manufactured in other countries, according to the report.
Some sources indicated Tesla is aiming to switch all other components to those made outside of China in the next year or two.
Tesla has been working to reduce reliance on Chinese parts for its US vehicles since the Covid-19 pandemic. However, sources revealed the company accelerated its strategy to break away from Chinese components this year following US President Donald Trump’s imposition of steep tariffs on Chinese imports, the report noted.
Some of the people said Tesla executives have been grappling with uncertainty caused by tariff fluctuations during the US-China trade war, which has made it difficult for the company to formulate consistent pricing strategies, the Wall Street Journal said.
In recent weeks, as disputes between China and the Netherlands led to renewed disruptions in automotive chip supplies, discussions within Tesla intensified about the need to accelerate its diversification efforts, the report cited some of the sources as saying.
The US is Tesla’s largest market, while China ranks second. It operates a factory in Shanghai — its largest globally — producing the Model 3 and Model Y.
Over the past several years, Tesla executives have repeatedly said that over 95 percent of components for the Shanghai factory are sourced locally.
Tesla has contracted with more than 400 local Tier 1 suppliers in China, with over 60 integrated into its global supply chain system, according to a November 26, 2024, report by local media outlet Shanghai Securities News.
Beyond Tesla, General Motors is also reportedly executing a de-China strategy for its supply chain.
GM executives have been instructing suppliers to seek alternative sources for raw materials and components outside China, with the ultimate goal of fully relocating the supply chain away from China, Reuters reported on November 12, citing informed sources.
Some sources indicated GM has set a 2027 deadline for certain suppliers to dissolve their China sourcing ties, the report said.
GM first issued this directive to some suppliers at the end of 2024, but the effort gained urgency this spring as the US-China trade war escalated, according to Reuters.
