Tesla maintains it does not exclude suppliers by country

Tesla maintains it does not exclude suppliers based on their country of origin, following reports that the company was asking partners to avoid China-made components in its US factories.

Grace Tao, Tesla’s China vice president, said that the automaker uses the same standards for selecting suppliers globally.

She did not directly address the Wall Street Journal report about restricting China-made parts in US manufacturing.

Tesla’s Shanghai plant works with over 400 domestic suppliers, and more than 60 of them also serve Tesla’s global operations, Tao said.

Tesla sources over 95% of components for its China-made Model 3 and the refreshed version of the Model Y locally.

🔗 Source: Reuters

🧠 Food for thought

Implications, context, and why it matters.

Tesla’s China sourcing faces tax credit compliance pressure

Under the Inflation Reduction Act’s Section 30D, vehicles lose the $7,500 Clean Vehicle Credit if any battery component is manufactured or assembled by a Foreign Entity of Concern starting in 2024, and if covered critical minerals come from a FEOC starting in 2025. A FEOC covers entities owned by or controlled by or under the jurisdiction of those countries. Covered countries include China with Russia. It includes Iran with North Korea.
The credit splits into two $3,750 parts tied to battery components and to critical minerals. Tesla must verify the origin of cells, modules, plus cathode and anode materials. Covered minerals span lithium with nickel, plus cobalt with graphite. Manganese is included.
Tesla may ask U.S. suppliers to avoid China-made parts for battery materials. The focus is eligibility drivers that affect U.S. prices and competitiveness.

Battery supply chain traceability vendors see demand for FEOC compliance

Automakers seeking Section 30D eligibility need records proving battery parts and critical minerals are not from FEOCs.
The U.S. Department of Energy requires Qualified Manufacturers, which are automakers registered with the Internal Revenue Service, to submit Compliance Reports with documentation and calculations on qualifying battery content. That adds paperwork.
These rules create room for vendors with battery traceability software and verification platforms that automate origin checks.
Investors and enterprise software firms should review automated origin tools, since automakers will need them to keep credit eligibility. Credits are not available for vehicles acquired after September 30, 2025.