Highlights

• China's export restrictions on rare earth materials are blocking Tesla's next-generation product development, especially the Optimus humanoid robot.
• The restrictions could potentially disrupt automotive and robotics manufacturing globally, as China supplies over 90% of rare earth magnets.
• Tesla is working through licensing challenges while facing broader strategic vulnerabilities in global rare earth supply chains.

Tesla CEO Elon Musk has confirmed that China’s escalating rare earth export restrictions are delaying the company’s next-generation product development, particularly its Optimus humanoid robot. Speaking during Tesla’s Q1 earnings call this week, Musk acknowledged that limits on shipments of dysprosium, terbium, and other critical magnet materials have created supply chain bottlenecks, stalling progress on key projects.

The restrictions, part of China’s response to President Trump’s sweeping 145% tariffs on Chinese goods, require new licensing for each rare earth shipment, effectively slowing or blocking U.S.-bound exports. Analysts warn the disruption could cripple automotive and robotics manufacturing across the globe within months, given that China supplies more than 90% of rare earth magnets used in electric motors and energy storage according to News.com (opens in a new tab) in Australia.

Musk said Tesla is "working through" the licensing process but conceded that Beijing's concerns over potential military applications, given the dual-use nature of humanoid robotics, could complicate approvals. Tesla’s Optimus project is critical to Musk’s broader vision for Tesla’s future, especially as the EV division struggles, with shares down nearly 37% year-to-date.

Critically, Tesla’s exposure underscores a broader strategic vulnerability: the Western auto and tech sectors' persistent dependence on Chinese rare earth supply chains, despite years of warnings. While Tesla is racing to localize lithium-iron-phosphate (LFP) battery production in the U.S., the company—and much of the EV and robotics industry—remains heavily reliant on Chinese-sourced magnet materials, with no immediate substitutes at scale.

As Rare Earth Exchanges has previously reported many times, without urgent investment in domestic magnet manufacturing and raw material processing, U.S. automakers and tech companies face escalating supply risks in a deepening geopolitical trade war.