Tesla Robots Affected by China's Export Restrictions On REE

Tesla’s humanoid robot Optimus, which it says is designed for taking over household chores, has recently hit a production snag, which Elon Musk calls a “magnet issue.” In early April, China blocked the export of seven rare earth metals in response to President Trump’s application of 54% tariffs on Chinese goods. Aside from being used in global chipmaking supply chains, these materials are also applied in several high-tech industries, including lasers, radar, jet engines, and more.

“We’re working through that with China. Hopefully, we’ll get a license to use the rare-earth magnets,” Elon Musk said. “China wants some assurances that these are not used for military purposes, which obviously they’re not. They’re just going into a humanoid robot.”

However, even if this robot is designed as a substitute for a household employee, its inherent humanoid design makes it useful for other tasks, including those that China might deem “military applications”. Aside from that, Musk’s other companies, like SpaceX, have active contracts with the U.S. military. Musk is closely allied with the U.S. president and works with him directly through DOGE or the Department of Government Efficiency. This might make Beijing balk at giving any entity related to him any license for these crucial materials.Some companies are looking for alternatives to Chinese sources for these rare earth metals, especially as China has claimed state ownership of all this material within its borders. However, they’d have difficulty looking for a replacement that can deliver at the exact cost and quality because of how much the East Asian country has invested in mining them. China produced about 70% of all the rare earth elements in the market in 2023, with 94% of the global gallium supply, crucial for power chips, coming from within its borders.

Many exporters have already expected delays because of China’s new requirements. However, Tesla is one of the first companies to publicly state the impact of China’s export bans on its plans and production. He also said that Trump’s tariffs have greatly impacted Tesla’s energy business, primarily as it imports its battery cells from the country.

“The impact of tariffs on the energy business will be outsized since we source LFP (lithium iron phosphate) battery cells from China,” Musk said during the earnings call. “We’re in the process of commissioning equipment for the local manufacturing of LFP battery cells in the US.”"Source: Future US Inc"