Tesla is accelerating its efforts to diversify its supply chain away from Chinese-made components and parts for its operations in the U.S. and Europe.
The move to diversify is not a new one, and Tesla has been working to increase the number of global suppliers for its North American and European production facilities over the last few years.
This work has led Tesla to examine its Tier 1, Tier 2, and Tier 3 suppliers, as well as their sourcing of parts and components.
China has long been a significant source of automotive parts and has established a massive supply chain to support this industry both in China and abroad. As of 2024, Tesla had over 400 local Tier 1 suppliers providing parts and components to its Giga Shanghai facility. Sixty of those suppliers also provided parts and components to various Tesla gigafactories, including Berlin and Texas.
According to insiders who spoke to The Wall Street Journal, Tesla executives are primarily concerned about pricing uncertainty stemming from tariffs and the ongoing trade war between China and the United States.
However, it is not just about the United States, as disputes between China and the Netherlands have only increased the need for Tesla to diversify, as automotive chip suppliers in the European Union were directly affected by pricing uncertainty.
Tesla is not alone on this diversification journey. Earlier this week, General Motors sources confirmed that they have instructed suppliers to seek alternative sources for components and raw materials not located in China. According to the reports, the ultimate goal for GM is to eliminate China from its supply chain, but this will take some time to accomplish.
