A recent report suggests that President Trump’s tariffs have caused disruptions in Tesla’s plans to source parts for its upcoming Cybercab and Tesla Semi production in China.
The ongoing trade war initiated by President Trump, characterized by constantly changing tariffs, has impacted supply chain managers worldwide, including Tesla. The American automaker imports a significant number of parts from countries such as China, Mexico, Canada, and Europe for most of its manufacturing programs in the US, including the upcoming Cybercab and Tesla Semi vehicles.
Tesla intends to commence production of these vehicles at Gigafactory Texas and a new factory in Nevada later this year, with plans to ramp up to volume production by 2026. However, Reuters reports that Tesla has put on hold its plans to source certain parts for the Cybercab and Tesla Semi from China due to the escalating tariffs imposed by President Trump.
Initially, Tesla was prepared to absorb the additional costs when Trump raised tariffs on Chinese goods to 34%. However, with the tariffs subsequently increased beyond that threshold, Tesla had to suspend its shipping plans for the specific parts. Trump recently raised tariffs on Chinese goods to 145%, prompting retaliatory tariffs from the Chinese government. As a result, Tesla had to halt new orders for Model S and Model X vehicles in China.
While some shareholders believed that the tariffs could benefit Tesla due to its vertical integration, the reality is that Tesla still relies on a significant number of parts from other countries, particularly Mexico. Approximately 25% of the parts for all Tesla vehicle programs manufactured in the US come from Mexico. The tariffs on auto parts from Canada and Mexico are currently on hold under the USMCA agreement, but Trump has indicated that this may change in the future.
The tariffs on Chinese goods primarily affect Tesla’s energy business, which relies on affordable Chinese battery cells. Tesla also imports some Chinese parts for its vehicles, and the 145% tariffs will have a significant impact on the company. In response to these challenges, Tesla is exploring alternatives and considering potential changes to its supply chain.
The unpredictability of Trump’s tariff policies, characterized by frequent changes and exceptions, poses challenges for companies like Tesla in terms of planning and decision-making. Tesla may have suspended its plans with Chinese suppliers in anticipation of potential changes to the tariffs, or in an effort to seek alternative sourcing options. Ultimately, Tesla and other companies affected by the tariffs must adapt to the evolving trade landscape and explore new strategies to mitigate the impact of these disruptions.
