As geopolitical uncertainties escalate, Tesla has requested its suppliers to relocate their component production lines outside of China and Taiwan starting from next year.
Six supply chain executives revealed to Nikkei Asia that suppliers producing printed circuit boards, displays, and electronic components have received requests from Tesla. These components are mainly used for Tesla models in non-Chinese markets.
Sources indicated that Tesla cited increasing geopolitical risks in the Taiwan Strait before the US presidential election and hoped that suppliers could establish alternative sources for non-Chinese markets to prevent disruptions in the supply chain.
A Taiwanese supplier for Tesla stated, “We have received Tesla’s request, they want components that are OOC (Out Of China) and OOT (Out Of Taiwan).”
“They hope that such a proposal could be realized in new projects next year,” the supplier mentioned.
Sources mentioned that Tesla is also discussing this matter with suppliers in Japan, South Korea, and other Asian countries. A senior executive from a Japanese electronics manufacturer informed Nikkei Asia that his company is one of the suppliers Tesla has been in talks with.
A senior executive from a component supplier mentioned that due to Tesla’s request, their company has begun increasing production capacity in Thailand. The executive stated, “For many clients, including Tesla, the so-called China+1 strategy also involves avoiding Taiwan.”
The Chinese Communist Party regards Taiwan as part of its territory and does not rule out the possibility of taking Taiwan by force. On Thursday morning, the People’s Liberation Army of China announced conducting live-fire exercises around Taiwan.
The Ministry of National Defense of the Republic of China (Taiwan) condemned China’s actions as irrational provocations that disrupt regional peace and stability. They mentioned deploying forces to respond and all personnel are on high alert to defend freedom and democracy.
Sources also indicated that besides Tesla, other American automobile manufacturers such as General Motors and Ford have requested suppliers to consider moving electronic product production lines outside of China and Taiwan.
Unlike Tesla, they have not formally made such requests.
A senior executive from an electronic product supplier stated, “We serve multiple American automobile manufacturers, and Tesla is the most proactive in avoiding risks in China and Taiwan regions.”
“OOC and OOT are indeed very challenging and costly because mature supply chains are located there,” the executive added.
While Tesla pursues parallel supply chains, it also faces increasing competition from Chinese electric vehicle manufacturers.
Chiu Shih-fang, a supply chain analyst at the Taiwan Institute of Economic Research, mentioned, “Since the second half of last year, electric vehicles have increasingly become the latest battleground in the US-China tech war.”
Chiu stated that Tesla’s competition with Chinese brands is more direct than with other foreign brands, making it reasonable for Tesla to establish capacity outside of China.
She said, “It is logical for car manufacturers like Tesla to make such requests to suppliers to prevent geopolitical uncertainties from causing disruptions in the supply chain.”
“This is also why we see many component suppliers accelerating their presence in Southeast Asia and Mexico,” Chiu Shih-fang pointed out.
(Adapted from relevant reports by Nikkei Asia)