Tesla is moving to eliminate China-made components from vehicles built in the United States, a major supply-chain overhaul driven by escalating trade tensions and new technology restrictions. According to people familiar with the effort, the company began swapping out China-sourced parts earlier this year, shifting orders to suppliers in Mexico, Southeast Asia, and parts of Europe.
The goal, sources told The Wall Street Journal, is to remove all China-origin parts from U.S. production within the next two years. Tesla has not publicly confirmed the strategy, but people involved say both cost pressures and geopolitical risk have forced the company to rethink how it sources core components.
The shift accelerated after the Trump administration imposed sweeping tariffs on Chinese imports. Tariff volatility complicated procurement for Tesla’s Fremont, California, and Austin, Texas factories, affecting everything from electronics to castings. Semiconductor export restrictions added more strain, particularly as Beijing tightened control over chip packaging and materials.
One recent bottleneck came from Nexperia, a Dutch chipmaker that operates packaging facilities in China. Beijing blocked exports after Dutch authorities seized the firm from its Chinese parent — which sits on a U.S. trade blacklist. Although China later allowed limited shipments following diplomatic talks, the episode disrupted supply for lighting and control-module chips and underscored Tesla’s vulnerability.
To reduce that exposure, Tesla has encouraged long-time Chinese suppliers to build factories closer to North American production. Companies making seating components, wiring harnesses, and metal parts have opened or are planning operations in Mexico and Southeast Asia. Internally, Tesla refers to this diversification as a “local-for-local” model, a strategy the company leaned into after the pandemic exposed the weaknesses of long shipping lines.
The biggest remaining challenge is batteries. Tesla has relied heavily on lithium iron phosphate (LFP) cells from China’s CATL — a chemistry widely used in its lower-priced EVs and stationary storage systems. But using China-made LFP packs disqualifies U.S.-built vehicles from federal EV tax credits and adds tariff costs.
Tesla stopped installing Chinese LFP batteries in U.S.-bound vehicles last year and is now working to build domestic capacity. The company expects to begin producing LFP cells for energy storage at its Nevada site in early 2026, though replicating China’s scale and cost structure will take time. China still dominates global cathode processing and cell manufacturing, giving CATL and BYD a structural advantage that Western suppliers have yet to match.
Tesla’s reengineering push mirrors broader shifts across the auto industry as U.S.–China tensions reshape access to minerals, magnets, semiconductors, and battery materials. Automakers such as Ford, GM, and Volkswagen have faced similar disruptions as both countries tighten export controls.
For Tesla, the strategy marks a clear move toward decoupling its American production. Multiple sources said the initiative is known internally as “China-free for America” — a quiet but far-reaching effort to reduce compliance risk, avoid sudden price shocks, and maintain eligibility under evolving U.S. trade and industrial-policy rules.
Featured image credits: Wikimedia Commons
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