- Uncommon earth metals kind the highly effective magnets essential to producing fighter jets, smartphones, and the motors that energy the arms of Tesla’s humanoid robotic, known as Optimus. CEO Elon Musk is optimistic the corporate could have hundreds of Optimus models by the top of the yr, however the firm could also be ready on an export license from China, which controls over 90% of the market, for six months or extra.
Elon Musk is assured Tesla will churn out 1 million of its humanoid Optimus robots by the top of the last decade—and even 2029. For now, nevertheless, manufacturing will solely transfer “as fast as the slowest and least lucky component in the entire thing,” he advised traders Tuesday—and President Donald Trump’s tariff battle with China has created a major roadblock.
As a part of its retaliation in opposition to Trump’s commerce barbs, Beijing has tightened export controls on seven uncommon earth metals, a transfer that underlines China’s dominance in a market important for making every little thing from fighter planes to smartphones. Notably for Tesla, these metals are vital to the small however highly effective motors Musk says will quickly allow Optimus robots to carry out family chores and work on the electric-vehicle maker’s meeting traces.
“I’m confident we’ll overcome these issues,” Musk mentioned Tuesday throughout Tesla’s first-quarter earnings name. “And we’ll, by the end of this year, have thousands of Optimus robots.”
Nonetheless, Tesla has seemingly no selection however to undergo China. The nation controls almost 70% of all U.S. imports of uncommon earths, in response to S&P International Market Intelligence.
However that stat solely begins to explain the dimensions of China’s mineral supremacy. The motors in Optimus, like smartphone chips, require these metals due to their ultra-magnetic properties. In keeping with a 2023 report from the Aspen Institute, Beijing controls 92% of worldwide magnet manufacturing from uncommon earths.
These so-called everlasting magnets are additionally usually essential within the manufacturing of electrical autos, however Musk mentioned Tesla, “on the whole,” doesn’t want them. He mentioned the design of Optimus, nevertheless, does require these magnets to energy the robotic’s arms with motors that received’t overheat or break in a small area.
“Those were affected by the supply chain, by basically China requiring an export license to send out any rare earth magnets,” Musk mentioned. “So we’re working through that with China. Hopefully, we’ll get a license to use the rare earth magnets.”
These licenses for shipments to the U.S. probably received’t be processed for at the least six months, Yang Jie, an export management lawyer at Shanghai legislation agency Huiye, advised the New York Instances.
“China wants some assurances that these are not used for military purposes, which obviously they’re not,” Musk mentioned. “They’re just going into a humanoid robot.”
Tariffs harm Tesla
Musk might have spent greater than $250 million and loads of his time to assist Trump win the presidency, which Wedbush Securities’ Dan Ives known as a “poker move for the ages” on the time, however it’s clear the administration’s chaotic tariff rollout has executed Tesla few favors.
Whereas Musk has headed the controversial Division of Authorities Effectivity (DOGE)—he advised traders he would quickly again away from that function to refocus on Tesla—his pleas to keep away from escalating commerce tensions appear to have largely fallen on deaf ears. The world’s richest man has repeatedly sparred with Peter Navarro, one in every of Trump’s prime commerce advisors, whom Musk has known as a “moron” and “dumber than a sack of bricks.”
Tesla’s web revenue decreased 71% yr over yr within the first quarter as auto revenues fell beneath $14 billion for the primary time in almost three years.
Musk mentioned the corporate’s localized provide chains in markets just like the U.S., Europe, and China put Tesla in a greater place than rivals to climate escalating commerce tensions. And but, he acknowledged, tariffs are powerful on an organization when margins are nonetheless low. Tesla’s gross margin fell to 16.3% in Q1, down from 17.4% in the identical interval final yr.
“I’ve been on the record many times saying that I believe lower tariffs are generally a good idea for prosperity,” Musk mentioned. “But this decision is fundamentally up to the elected representative of the people, being the president of the United States. So I’ll continue to advocate for lower tariffs rather than higher tariffs, but that’s all I can do.” There are indicators Musk’s message is getting extra traction in Washington: At a closed-door occasion hosted by JPMorgan Chase, Treasury Secretary Scott Bessent signaled a attainable “de-escalation” with China. Trump additionally indicated tariffs will come down considerably if a commerce deal is reached.
This story was initially featured on Fortune.com
