EV giant Tesla Inc TSLA has reportedly told suppliers to start building components and parts outside China and Taiwan, starting as early as next year.
What Happened: The company has requested suppliers making printed circuit boards, displays, and electronics control unit systems to be used in Tesla vehicles sold outside of China to make them outside both China and Taiwan, Nikkei Asia reported, citing multiple supply chain executives.
The company cited mounting geopolitical risks in the region ahead of the upcoming U.S. Presidential election and is looking to build alternative supply sources to prevent supply chain disruptions.
Tesla discussed the matter with Asian suppliers from Japan, Taiwan, and South Korea, among others, the newspaper said, adding that the request was made before the U.S. hiked tariffs on Chinese imports including electric vehicles.
Why It Matters: Earlier this month, the U.S. government imposed a 100% tariff on electric vehicles made in China, quadrupling it from the previous 25%. Biden administration further implemented a 25% tariff on electric vehicle batteries from China and a 25% tariff on critical minerals that go into making these EV batteries.
Meanwhile, tensions have been intensifying in the region between China and Taiwan. On Thursday morning, China initiated ‘punishment’ drills around Taiwan after Lai Ching-te of the Democratic Progressive Party took office as Taiwan's new president. China views Taiwan as its territory and has denounced Lai as a "separatist."
China is Tesla’s second-largest market outside of the U.S. The company also has a gigafactory in Shanghai where it manufactures its Model 3 and Model Y for both sales within China and export to foreign markets.
Apple’s Playbook? Tech giant Apple Inc. has also been increasing production in Southeast Asia and India in an attempt to shift its supply chain’s overreliance on China. However, the company has also been deepening its involvement with China with its Chinese supplier network growing to 52 last year from 48 in 2022.
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