Tesla $TSLA ( ▲ 3.95% ) is now requiring its suppliers to avoid China-made parts for its U.S. cars as more automakers look to navigate the unpredictability of costs, pricing, and supply challenges tied to the country.
The details: Tesla’s move, which comes amid growing geopolitical tensions with Beijing, mirrors a step taken by General Motors $GM ( ▼ 1.59% ) last week aimed at cutting its suppliers’ ties to China
Much like GM, Tesla had already begun shifting its product strategy, replacing some China-made components in its cars.
The EV maker plans to replace all China-made components in its vehicles within the next year or two, reports the Wall Street Journal, which broke the news.
Tesla has also been steadily increasing its North American sourcing for its U.S. factories over the past two years amid tariff threats.
The industry fallout from China’s ban on Nexperia’s chip exports (and the production halts sparked by the dispute between Beijing and the Netherlands) has only intensified geopolitical tensions with the country.
Why it matters: Tesla’s directive underscores how quickly China-related supply risk is reshaping sourcing strategies across the industry. As more automakers move to insulate themselves from tariff swings, export bans, and geopolitical shocks, the shift away from China-made parts could reshape cost structures, parts availability, and production planning in North America.
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Between the lines: Tesla has been facing some significant challenges in China, one of its most important markets.
Sales of Tesla's China-made electric vehicles slid 9.9% to 61,497 units in October from a year earlier, reversing a 2.8% increase in September.
And output of the Model 3 and Model Y from the EV maker’s Shanghai plant, including exports, dropped 32.3% from September.
Bottom line: News of Tesla’s push to strip China-made parts from its U.S. vehicles underscores the acceleration of the industry’s race to de-risk supply chains. Expect more automakers to follow suit, with “China-free” sourcing rapidly becoming a competitive requirement, not a niche strategy.
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