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Tesla’s ambitious timeline for mass-producing its humanoid robot, Optimus, has encountered a significant disruption following China’s recent restrictions on the export of rare earth elements.
The policy change, announced by China’s Ministry of Commerce on April 4, is a direct response to escalating trade tensions between Beijing and Washington.
Seven rare earth elements—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—are now subject to new export controls. These elements are important for making advanced electronics, defense equipment, wind turbines, and electric vehicles. They are especially crucial in magnet form for the actuators that allow Tesla’s Optimus robot to function and move.
In the Q1 2025 earnings call, Tesla’s CEO, Elon Musk, said these export controls are delaying production. Tesla is working with Chinese authorities to get the needed export licenses, but he noted that the process is complicated and could take a while.
“China is asking for assurances that these materials will not be used for military purposes, which, of course, they will not,” Musk clarified. “They are solely intended for use in our humanoid robot project.”
Global Supply Chain at Risk
China accounts for approximately 61% of global rare earth production and 92% of processing, according to the International Energy Agency (IEA). According to data from the Center for Strategic and International Studies (CSIS), China supplied the United States with 70% of its rare earth compounds and metals from 2020 to 2023.
The updated controls for rare earth material exports illustrate the growing global vulnerability of supply networks, which has an impact on high-tech manufacturing sectors.
Tesla and other American companies in the market are subject to unpredictable business situations as a result of special export licenses. Tesla is at risk of failing to manufacture thousands of Optimus robots during 2025 due to the protracted multi-month licensing framework.
Tesla designed the general-purpose bipedal humanoid robot Optimus to meet the requirements of both residential and industrial users. Musk clarified that the intricate robot employs over 10,000 exclusive components that encounter difficulties in locating supply chain networks. Musk emphasized that the development speed of intricate new products is equivalent to the speed of its slowest component.
Broader Industry Impact
The announcement has had ripple effects across markets. After Musk emphasized the operations of UBTech Robotics Corp., Horizon Robotics Inc., and JL Mag Rare-Earth Co., their share prices experienced substantial increases.
It appears that Tesla is delaying the execution of new Model S and Model X orders in China due to the ongoing trade conflict, which is causing operational challenges throughout the nation.
The electric vehicle market’s substantial expansion served as a backdrop for these geopolitical disputes between major powers.
Chinese manufacturers such as BYD and Geely are accelerating international expansion, while foreign automakers explore local production to circumvent export barriers. “China remains a critical market, but the environment is increasingly complex,” commented Wei Jianjun, chairman of Great Wall Motors.
In response to the supply disruption, Musk also revealed that Tesla is accelerating plans to localize the production of lithium iron phosphate (LFP) battery cells in the United States. While this move may help reduce dependence on Chinese suppliers in the long term, it offers no immediate remedy to the current rare earth magnet shortage.
