Tesla urges suppliers to make car parts out of China and Taiwan amidst escalating tensions

In the rapidly evolving automotive industry, securing robust and reliable supply chains has become paramount, especially amidst rising geopolitical tensions. Tesla, the pioneer in electric vehicle (EV) innovation, is proactively addressing these concerns by reshaping its supply chain strategies. As the maker of the acclaimed Model Y electric crossover, Tesla is ensuring the continuity of its supply chain even as geopolitical tensions between China, Taiwan, and the United States intensify.

According to a recent report by Nikkei Asia, Tesla has urged several suppliers to commence building components outside of China and Taiwan as early as next year. These components, including displays, electronic control units, and printed circuit boards, are vital for Tesla EVs marketed outside of China. The American automaker’s initiative is a preemptive measure against the geopolitical risks looming in the Greater China region, particularly with the upcoming U.S. presidential election.

"We serve several American automobile makers, and Tesla is the most aggressive in terms of trying to avoid the risks surrounding China and Taiwan. 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," said an electronics supplier executive confined to Nikkei Asia.

Tesla's strategy focuses on establishing an alternative supply chain to ensure that vehicle deliveries remain unaffected by potential political upheavals. By diversifying its supplier base, Tesla aims to mitigate the risk associated with its current reliance on China and Taiwan, thereby safeguarding its production lines and maintaining its competitive edge in the global market.

Other major American automotive giants, including General Motors and Ford, are also taking steps to secure their supply chains. These companies have reached out to suppliers in the Greater China region to explore the possibility of shifting electronics production outside of China and Taiwan. However, unlike Tesla, they have yet to formalise such requests.

While the transition of manufacturing electronic components to other countries is feasible, it presents significant challenges. The established supply chains in China and Taiwan offer cost efficiencies and scalability that are difficult to replicate elsewhere. Consequently, relocating production facilities could potentially increase the cost of finished vehicles.

Amidst these supply chain manoeuvres, the role of aluminium in automotive manufacturing cannot be overstated. Aluminium, known for its lightweight, non-corrosive, and 100% recyclable properties, is integral to the production of various automotive parts. Its application ranges from structural components to intricate electronic assemblies, highlighting its versatility and sustainability. As automakers like Tesla seek to diversify their supply chains, leveraging aluminium can provide a strategic advantage. Aluminium's global availability and extensive recycling potential make it an ideal material for manufacturers looking to mitigate geopolitical risks and ensure a steady supply of essential components.

If you wish to learn more about the use of aluminium in the transportation sector, please have a look at AL Circle's special report, Future of Aluminium in the Transportation Sector.