Earlier this year, the electric-vehicle maker decided that it would stop using China-based suppliers for Tesla cars that are made in the U.S., according to people familiar with the situation. Tesla and its suppliers have already replaced some China-made components with parts made elsewhere. Tesla is aiming to switch all other components to those made outside of China in the next year or two, some of the people said.
Tesla has been trying to reduce its dependence on China-made components for its U.S. cars since the Covid-19 pandemic disrupted the flow of goods from China, encouraging its China-based suppliers to make components elsewhere including in Mexico. But this year, after President Trump imposed stiff tariffs on Chinese imports, the company accelerated the strategy to cut out Chinese parts, the people said.
China is a major producer and exporter of auto parts—including chips and batteries—and materials that go inside cars. Many of them are cheaper due to China’s huge production scale, lower costs and weak currency.
Tesla executives have been grappling with the uncertainty brought by fluctuating tariff levels in the U.S.-China trade battle, which has made it difficult for the carmaker to formulate a coherent pricing strategy, some of the people said.
The geopolitical tensions between Washington and Beijing and the fallout on the global auto supply chain have only intensified Tesla’s urgency in pursuing the China-free strategy. In recent weeks, fresh disruptions in the supply of automotive chips stemming from a spat between China and the Netherlands have triggered discussions at Tesla about the need to accelerate diversification, some of the people said.
Tesla didn’t respond to a request for comment.
Tesla’s strategy is the latest example of how trade and geopolitical tensions are driving a decoupling of the world’s two largest economies and increasingly redrawing global supply chains. Many American companies are seeking to exclude China-made components or manufacture outside of China when it comes to products for the U.S. market. In turn, Chinese technology companies are erasing American components and technology from their supply chains.
The auto industry has been hit particularly hard by China-U.S. friction because of the global nature of its supply chains and business. This spring, automakers were rattled after China imposed export restrictions on certain rare earths and magnets that are widely used in cars and their production. More recently, carmakers have struggled to secure chips after China blocked the export of semiconductors made by a firm called Nexperia that are used in car lights and electronics.
Nexperia is a Dutch company whose chips are largely manufactured in Europe but ultimately are exported to the world from China, where processing and packaging take place. China blocked the export of the chips after the Dutch government seized control of Nexperia from its Chinese parent, which is on a U.S. trade blacklist.
The Dutch and Chinese governments are still fighting over the issue, even though Beijing has allowed Nexperia chips to be shipped out to some overseas customers following a summit last month between Trump and Chinese leader Xi Jinping.
The U.S. is Tesla’s biggest market, and Tesla vehicles running on American roads are produced at the carmaker’s factories in the U.S. In China, Tesla produces cars at its Shanghai plant using mostly locally produced components. The Shanghai-made cars are shipped both within China and overseas, mostly to Asia and Europe, but not to the U.S.
Over the years, Chinese suppliers that Tesla has been working with in China have increasingly been shipping parts globally for the carmaker’s factories elsewhere. A China-based executive said earlier this year that the Shanghai factory had some 400 direct Chinese suppliers, more than 60 of which had supplied Tesla’s global production.
Tesla has been pursuing a strategy of cutting back on made-in-China components for its U.S. cars since Trump’s first administration. As a part of this approach, Tesla has worked with its Chinese suppliers—including those making seat covers and metal casings—to set up factories and warehouses in Mexico and Southeast Asia in recent years, people familiar with the project said.
One Chinese-made component that Tesla is struggling to substitute is the lithium-iron phosphate battery. China’s Contemporary Amperex Technology, or CATL, has been a major supplier to Tesla for the battery, known as LFP.
Until last year, Tesla was selling cars in the U.S. with Chinese-produced LFP batteries, but since then it stopped doing so, because they became ineligible for EV-related tax credits and also due to U.S. tariffs.
Tesla is working to build LFP batteries for energy-storage products in the U.S. In October, the company said it expected its facility in Nevada making such battery products to start running in the first quarter of 2026.
Tesla Chief Financial Officer Vaibhav Taneja said in April that the company was working on manufacturing LFP cells in the U.S., and on “securing additional supply chain from non-China-based suppliers.”
“But it will take time,” he said.
Write to Raffaele Huang at raffaele.huang@wsj.com and Yoko Kubota at yoko.kubota@wsj.com