Tesla cuts Chinese parts from U.S. cars amid rising tariffs and tensions
Tesla (TSLA) has initiated a significant shift in its supply chain. The electric vehicle giant is now mandating its suppliers to exclude Chinese parts in the production of its cars in the U.S. This move comes amidst geopolitical tensions and escalating tariffs on Chinese imports.
Tesla, previously heavily reliant on Chinese suppliers, has been actively seeking alternatives and encouraging them to relocate production to other regions. While the company has successfully diversified its supply chain for many components, it has yet to secure an alternative supplier for lithium-iron phosphate (LFP) batteries traditionally sourced from Chinese manufacturers like CATL and BYD. Tesla continues to source LFP cells from these Chinese producers and LG Energy of South Korea.
The transition to remove Chinese parts has been expedited this year due to steep tariffs on Chinese imports. Tesla and its suppliers have already replaced some Chinese components with parts made elsewhere and aim to switch all remaining ones in the next year or two.
Tesla's stock fell -5.9% this week, despite the broader tech market managing to eke out a gain. The company's efforts to diversify its supply chain and reduce its reliance on Chinese parts are expected to continue, driven by geopolitical tensions and tariff disputes with China.
