Tesla and GM try and shake off Chinese parts from supply chain

A major shift is quietly happening on the assembly lines of America's biggest automakers. Giants like Tesla and General Motors are hitting the brakes on using Chinese-made parts for the cars they sell in the United States. Far from being just a minor tweak, this is a top-to-bottom rethinking of where they get the thousands of components needed to build modern vehicles, especially popular EVs. Both Tesla and GM are now actively telling their suppliers to look elsewhere, sparking a massive scramble to find new sources for everything from raw materials to complex electronics.

Worries about relying too much on one country started during the COVID-19 pandemic, when supply chain shutdowns caused chaos worldwide. But the real push came from money and risk. Steep tariffs on Chinese imports, a holdover from the US-China trade war, have made costs unpredictable. Trying to set a budget when you don't know if a critical part will cost 25% more next month became a gamble.

Tesla is moving the most aggressively and decided earlier this year to cut Chinese suppliers out of its US production. The company is asking its suppliers to stop using Chinese-made components for cars built in the US. Some of Tesla's partners have already managed to replace these parts with components made in other countries. But the ultimate goal is much bigger, though - Tesla is reportedly planning to switch all other components to non-Chinese sources within the next one to two years.

The plot thickens when you look at Tesla's operations inside China. The company might be building a wall between its US cars and Chinese parts, but its business in China is booming and is deeply interconnected. Its largest factory in Shanghai builds the popular Model 3 and Model Y with over 95 percent of the components sourced locally from Chinese companies. A report from November 26, 2024, noted that Tesla has contracts with over 400 local suppliers in China. More than 60 of those companies are so integrated that they are part of Tesla's global supply chain.

Tesla isn't the only one moving away from its Chinese suppliers. General Motors executives have been instructing their suppliers to find alternative sources for both raw materials and finished components outside of China. The company's goal is to relocate its entire supply chain away from the country for its US operations. Sources indicate GM has given some suppliers a firm 2027 deadline to completely dissolve their China sourcing connections. This directive, which GM first issued in late 2024, gained new urgency this spring as trade tensions escalated once again.

Fueling this rush for both Tesla and General Motors are fresh fears of disruption. The financial headache of tariffs is one thing, but a sudden parts shortage is another. Discussions inside Tesla have intensified after a dispute between China and the Netherlands threatened the supply of automotive chips, and have only reinforced the idea that relying so heavily on one region is simply a dangerous gamble. For EV makers, this "de-China" shift is becoming less about politics and more about simple, predictable survival.

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