Tesla Inc.’s (TSLA) production of its Optimus humanoid robot, designed to automate household tasks, has been disrupted by China’s tightened rare earth export controls, introduced earlier this month amid escalating U.S.-China trade tensions.
During Tuesday’s earnings call, CEO Elon Musk cited a “magnet issue” impacting production, as exporters face stricter licensing requirements for rare-earth minerals critical to the robot’s components. Tesla is among the first major companies to publicly acknowledge direct fallout from the new restrictions. We’re in discussions with China to secure rare-earth magnet licenses, said Musk, who also serves as an advisor to the White House. China seeks assurances these materials won’t be used for military purposes—which they clearly aren’t. This is strictly for a civilian humanoid robot.
The export controls, targeting seven additional rare-earth minerals, are widely seen as retaliation against U.S. punitive tariffs under the Trump administration. China’s Commerce Ministry emphasized that rare earths, classified as dual-use items with both civilian and military applications, necessitate stricter oversight. These minerals are vital for advanced technologies, including laser systems, radar devices, wind turbine magnets, and aerospace coatings.
News of Tesla’s production delays sparked rallies in Chinese robotics and rare-earth stocks. Shares of UBTech Robotics (9880.HK), Horizon Robotics (8YO.SG), Zhejiang Changsheng Sliding Bearings (300718.SZ), and Jiangsu Pacific Precision Forging (300258.SZ) surged over 10%, while rare-earth supplier JL Mag Rare-Earth Co. jumped more than 10%.
Musk also addressed broader tariff impacts, noting Tesla’s energy sector faces the heaviest blow. Tariffs disproportionately affect our energy business due to reliance on Chinese LFP [lithium iron phosphate] batteries, he said. The company is commissioning U.S.-based LFP battery production equipment and seeking non-Chinese suppliers, though he cautioned the transition will take time.
