Tesla Pressures Suppliers to Shift Production from China and Taiwan

Tesla is urging its suppliers to shift production of key components out of China and Taiwan by next year, a move aimed at mitigating geopolitical risks in the region. This request, directed at suppliers of printed circuit boards, displays, and electronic control units, is in response to escalating tensions between China, Taiwan, and the United States.

“We got the request from Tesla that they hope to have components that are both OOC and OOT, meaning out of China and out of Taiwan,” a source from a Taiwan-based supplier to Tesla told Nikkei Asia. “They hope such a proposal can materialize from next year's new projects.”

The geopolitical landscape has grown increasingly volatile, with China's military conducting drills around Taiwan and the upcoming U.S. presidential election adding to the uncertainty. Tesla's proactive strategy is not only a defensive measure but also a way to maintain its competitive edge amidst these challenges. By diversifying its supplier base, Tesla aims to prevent potential supply chain disruptions that could impact its vehicle production and delivery.

Tesla's approach contrasts with other American automakers like General Motors and Ford, which have also considered moving electronics production out of China and Taiwan but have not made formal requests. The established supply chains in these regions offer significant cost efficiencies and scalability, making the transition challenging and potentially costly.

Despite the difficulties, Tesla's pursuit of parallel supply chains is seen as a logical step, especially given the rising competition from Chinese EV makers like BYD. In the first quarter of 2024, BYD captured a 15% share of the global battery electric vehicle market, while Tesla's share dropped to 19% from 22% the previous year.

Tesla's CEO Elon Musk's recent visit to China underscored the company's ongoing commitment to its second-largest market. During the visit, Musk sought approval for Tesla's most advanced driver-assist software, FSD, highlighting the company's strategic balancing act between mitigating risks and maintaining market presence.