According to an analysis conducted by Nikkei in Japan, nearly 40% of the suppliers for materials used in Tesla’s electric vehicle batteries are Chinese companies. Nikkei had sent a letter to Tesla inquiring about its reliance on Chinese suppliers but did not receive a response by the publication deadline.
Based on Nikkei’s analysis of the supply chain, China emerged as the largest supplier of materials for the lithium-ion batteries used in Tesla’s electric vehicles. Out of the 61 companies in the storage battery category, 39% were Chinese companies. The analysis was carried out in collaboration with Fronteo, a Tokyo-based IT services management company that utilizes a machine-learning algorithm to identify data with specific characteristics. By employing artificial intelligence, they examined public information from financial statements and press releases to identify 13,428 companies believed to be supplying items for Tesla’s EV production, including suppliers up to the quinary level (five steps up the supply chain).
China’s dominance was also evident in other areas of Tesla’s supply chain. Among the 42 firms engaged in nonferrous smelting, excluding aluminum smelters, China accounted for 40% of the suppliers. In the inorganic chemistry group, Chinese companies held the top share at 33% out of the 102 suppliers.
To assess Tesla’s reliance on major suppliers, Fronteo employed a chokepoint score index, which measures the degree of a final product maker’s dependence on a specific supplier on a 10-point scale, with 10 indicating the highest dependence. Chinese companies that were identified as vital suppliers for Tesla included Ganfeng Lithium, a major manufacturer of lithium products, with a chokepoint score of 6.8. Novoray, a significant producer of inorganic compounds, scored 7.1, while Zhejiang Huayou Cobalt, a manufacturer of cobalt materials, rated at 5.7.
An examination of the shareholders of these companies revealed that Novoray and Huayou Cobalt are influenced by the Chinese government, which indirectly owns 9% and 12% of their shares, respectively.
In terms of overall Tesla suppliers, US companies constituted 22% of the total, while Chinese firms accounted for 17%. Tesla’s reliance on Chinese suppliers was 4 percentage points higher than that of General Motors.
Recognizing the importance of a resilient lithium supply chain, Tesla is actively working to enhance it. The company procures lithium from suppliers such as Albemarle and Livent, as well as China’s Ganfeng, as stated in a report released by Tesla in 2022. Moreover, Tesla has embarked on the construction of a lithium refining facility, entering a business domain that has been predominantly dominated by China.
