The Wall Street Journal (WSJ) reported on the 15th (local time) that Tesla, the electric-vehicle maker led by Elon Musk, has set a goal of not using Chinese-made parts in vehicles produced in the United States and is accelerating a supply chain overhaul.
As geopolitical tensions between the U.S. and China intensify and a strong tariff wall becomes a reality, this is a strategic move to completely sever dependence on China in the United States, the world's largest electric-vehicle market. Experts cited this as a clear example of "decoupling," in which global supply chains are rapidly restructured for political reasons.
Citing key officials, WSJ reported that earlier this year Tesla began asking major suppliers that provide parts to its U.S. factories to completely exclude Chinese-made parts. Tesla and its suppliers have already completed replacing some Chinese-made parts with components produced in other regions. According to the official, Tesla aims to transition all remaining parts to products made outside China within the next one to two years.
Tesla's move to pivot away from China has, in fact, been underway for years. WSJ reported that after suffering severe disruptions in sourcing Chinese parts during the COVID-19 pandemic, Tesla worked to reduce its reliance on China. At the time, Tesla encouraged its Chinese partners that make seat covers, metal casings, and other components to build factories and warehouses in Mexico or Southeast Asia.
What accelerated this strategy was President Donald Trump's move earlier this year to impose strong tariffs on Chinese imports. Tesla's management faced severe uncertainty as tariff levels fluctuated due to the U.S.-China trade war. This made it very difficult to establish a consistent vehicle pricing strategy.
On top of that, recently heightened geopolitical conflicts have lit a fire under Tesla's "China-free strategy" for its supply chain. In particular, the recent disruption in the supply of automotive semiconductors sparked internal discussions at Tesla about the need to hasten supply chain diversification, WSJ reported. The auto industry was shaken this spring when China imposed export restrictions on certain rare earths and magnets widely used in vehicle production.
The biggest hurdle in Tesla's pivot from China is batteries. In particular, LFP (lithium iron phosphate) batteries, which are highly price-competitive, are considered the most difficult components to replace. China's CATL was Tesla's key supplier of LFP batteries.
Until last year, Tesla sold vehicles equipped with Chinese-made LFP batteries in the United States. However, because these vehicles failed to meet U.S. government electric-vehicle (EV) tax credit eligibility requirements and were hit with high import tariffs, the company ultimately halted their use in the United States.
Tesla is currently working to produce LFP batteries directly in the United States. In October, it said the related facility under construction in Nevada is expected to begin operations in the first quarter of 2026.
The United States is currently Tesla's largest market, and all Tesla vehicles on U.S. roads are produced at domestic factories such as in California and Texas. By contrast, the Shanghai factory in China produces vehicles using parts sourced from about 400 local suppliers. China-made Teslas are sold in the domestic Chinese market and in parts of Asia and Europe, but they do not enter the U.S. market.