Tesla Wants Its Suppliers To Make Parts Outside Of China And Taiwan Amid Rising Tensions

General Motors and Ford are also reportedly looking to secure their supply chains in case something goes wrong.

Tesla Giga Shanghai - Model Y General Assembly

Iulian Dnistran

By: Iulian Dnistran

May 27, 2024 at 9:00am ET

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Tesla, the maker of the wildly popular Model Y electric crossover, wants to make sure its suppliers can ship parts even as geopolitical tensions between China, Taiwan and the United States continue to rise.

According to a report from Nikkei Asia, Tesla asked several suppliers to start building components outside of China and outside of Taiwan as early as next year. The parts in question, such as displays, electronics control units and printed circuit boards, are to be used in Tesla EVs sold outside of China.

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Tesla's presence in China

Besides having several car factories in the United States, Tesla also operates an EV manufacturing facility near Shanghai, China. The American company also has a Gigafactory in Germany and another one has been confirmed for Mexico.

The American car manufacturer’s request mentioned the increasing geopolitical risks in the Greater China region ahead of the upcoming U.S. presidential election, according to six suppliers. Tesla’s move is aimed squarely at establishing an alternative supply chain so that car deliveries can stay on track even if politics derail the current state of affairs.

Gallery: Tesla Giga Shanghai (Tesla Gigafactory 3)

Tesla Gigafactory 3

Tesla Model 3 at the Tesla Gigafactory 3 Tesla Gigafactory 3 images progress

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While far from impossible, manufacturing electronic components on a large scale in other countries will likely raise the cost of the finished vehicles. It’s currently very difficult to compete in the electronics parts market if you don’t have a manufacturing facility in China or Taiwan. The two countries are two of the world’s leading suppliers of such parts, so shifting production somewhere else will take some effort.

"We serve several American automobile makers, and Tesla is the most aggressive in terms of trying to avoid the risks surrounding China and Taiwan," an electronics supplier executive told Nikkei Asia. "It's really hard and costly to do OOC (out of China) and OOT (out of Taiwan), as that is where the mature supply chain is."

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