Tesla VP Defends China Ties After Report Company Is Cutting Chinese Parts From US Cars

Tesla’s top China executive publicly defended the company’s deep ties to Chinese suppliers on Wednesday, directly contradicting reports that the automaker is systematically removing China-made components from its American factories.

Grace Tao, Tesla’s vice president of external affairs in China, posted on Weibo that Tesla applies “the same strict and objective standards for selecting suppliers across its global production facilities.” She emphasized that a supplier’s country of origin “does not constitute an exclusionary criterion.”

The statement comes just 11 days after the Wall Street Journal reported Tesla has been requiring suppliers to exclude China-made parts from US-bound vehicles, with a goal of completing the transition within two years.

The $3,700 Price Gap Tesla Cannot Ignore

Tao’s defense centered on economics. Tesla’s Shanghai Gigafactory achieves the lowest global production costs precisely because of its Chinese supply chain. The Model 3 sells for 235,500 yuan ($33,250) in China versus $36,990 in the United States, a price advantage built on more than 400 domestic suppliers and 95% local component sourcing, reports Bloomberg.

Of those 400 Chinese partners, more than 60 have been integrated into Tesla’s global procurement system, helping the company achieve what Tao called “the best quality, highest efficiency, and optimal cost.”

The Shanghai factory is not just serving China. It functions as Tesla’s primary export hub, shipping vehicles to Europe, Australia, South Korea, and other Asian markets. In October 2025, the facility exported over 35,000 vehicles, the highest monthly export volume in two years.

What the Wall Street Journal Actually Reported

The November 15 WSJ report painted a different picture for Tesla’s American operations. According to people familiar with the matter, Tesla has been working to eliminate China-sourced components from its Fremont and Texas factories since the COVID-19 pandemic exposed supply chain vulnerabilities.

The effort accelerated significantly after President Trump imposed steep tariffs on Chinese imports. Tesla executives reportedly struggled with tariff fluctuations that made consistent pricing strategies nearly impossible to formulate.

The company has already replaced some Chinese components and is pushing suppliers to complete the transition within one to two years. General Motors this week issued similar instructions to thousands of its suppliers, signaling an industry-wide decoupling from Chinese parts for North American production.

The Dual Supply Chain Reality

Tesla appears to be building two distinct supply ecosystems. In China, it continues deepening local partnerships. In the United States, it is systematically reducing Chinese content.

This approach makes strategic sense. Shanghai’s 95% localization allows Tesla to bypass Chinese tariffs entirely while maintaining cost advantages that competitors struggle to match. Meanwhile, US production increasingly relies on domestic and non-China sources to avoid the tariff penalties that have hammered other automakers.

The strategy echoes Tesla’s broader pattern of geographic flexibility. When trade tensions spike, localized production provides insulation. Volkswagen just reported a $1.4 billion quarterly loss partly driven by Trump’s tariffs on European imports, a fate Tesla avoids through its American manufacturing footprint.

EVXL’s Take

Tao’s Weibo post is public relations, not policy reversal. Tesla is not abandoning its Chinese suppliers. It is firewalling them away from American production while doubling down on their role serving Asia-Pacific and European markets.

This is the “decoupling” we have been tracking all year, playing out in real time. Tesla is effectively picking sides for each market, building parallel supply chains that can operate independently as US-China trade relations continue deteriorating.

The irony is rich. Tesla CEO Elon Musk has positioned himself as a key ally of President Trump, yet Trump’s tariff policies are forcing Tesla to restructure its entire US supply chain. We documented in April how Trump’s tariffs threatened EV price hikes while giving Tesla an edge through domestic production. That edge now requires expensive supplier transitions.

Meanwhile, Tesla’s China business faces its own pressures. We have covered Tesla’s declining China sales extensively, with the company’s market share dropping from over 20% in 2021 to just 10% in 2025 as Chinese competitors like BYD surge ahead. Tao’s defense of Chinese suppliers reads as much like relationship management with Beijing as corporate communications.

The bigger picture: Tesla is navigating a world where geopolitics increasingly dictates manufacturing strategy. The company that once disrupted the auto industry with software and batteries now spends enormous energy managing tariff exposure and political relationships across two hostile superpowers. Whether Musk’s political entanglements help or hurt that balancing act remains the open question.

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