Chinese trade restrictions on rare earth metals magnets are taking a bite out of Tesla’s plans to pivot into a robotics company, CEO Elon Musk told investors Tuesday.
In addition to rare materials like gallium, germanium and antimony, China cut off exports of the powerful magnets that are instrumental in manufacturing the robot’s arms.
Musk has long pitched the humanoid robots, named “Optimus,” as a core plank of Tesla’s future growth. The company needs that more than ever: Tesla reported disastrous first quarter earnings yesterday, with profits dropping 71% year on year.
(Were it not for regulatory credits, Tesla would’ve actually lost money last quarter.)
“Basically China [is] requiring an export license to send out any rare earth magnets. So we’re working through that with China,” Musk said during Tesla’s earnings call on Tuesday.
“Hopefully we’ll get a license to use the rare earth magnets. 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. But that is … a challenge.”
China slapped export controls on rare earth minerals earlier this month after President Donald Trump announced a slew of tariffs on virtually every country in the world. Among them was a tariff on Chinese goods that Trump later escalated to 145%, based on what appears to be terrible math.
China responded in kind, leading to a pronounced slump in U.S. markets and panic among CEOs of U.S. retailers.
“The big box CEOs flat out told [Trump] the prices aren’t going up, they’re steady right now, but they will go up. And this wasn’t about food. But he was told that shelves will be empty,” a source told Axios.
Trump has since softened his rhetoric on the country, but according to CNN Beijing bureau chief Steven Jiangit sure seems like Trump’s chaotic on-again-off-again policies have put the U.S. at a distinct disadvantage.
“Without having to do anything, Beijing already seems to have the upper hand here,” Jiang said. “In contrast to all the flip flops and twists and turns from Washington, the Chinese have been standing their ground, saying they would fight this trade war to the very end while not completely shutting the door for potential talks.”
Jiang said a “deeply connected Chinese source” told him the country won’t engage in trade talks with the U.S. unless the White House begins to demonstrate “sincerity, reciprocity, and most importantly, consistency.”
On Monday, Trump said his tax on Chinese imports would come down “substantially,” but as he often does, he offered no specifics.
