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Nikkei Analysis Finds Tesla Relies On China For 40% Of Battery Supply Chain

An analysis by Nikkei in Japan concludes that nearly 40% of the suppliers for materials used in Tesla’s electric vehicle batteries are Chinese companies. Nikkei sent a letter to Tesla asking about its dependence on Chinese suppliers but said that it had received no reply by the publication deadline. 

China was the largest supplier of materials for the lithium-ion batteries used in Tesla’s EVs, constituting 39% of the 61 companies in the storage battery category, based on Nikkei’s analysis of the supply chain. 

Nikkei worked with Tokyo-based IT services mangement company Fronteo, which uses an original machine-learning algorithm to find data with specific characteristics, to analyze Tesla’s supply chain. An analysis of public information included in financial statements and press releases using artificial intelligence identified 13,428 companies believed to supply items for Tesla’s EV production down to quinary suppliers—those five steps up the supply chain. 

China accounted for 40% of the 42 firms engaged in nonferrous smelting excluding aluminum smelters. Chinese companies also held the top share, at 33%, among the 102 suppliers in the inorganic chemistry group. 

Tesla’s reliance on major suppliers was rated using Fronteo’s chokepoint score index, which measures the degree of a final product maker’s dependence on a specific supplier on a 10-point scale, with 10 representing the heaviest dependence. Fronteo was awarded a patent on the technology in 2022. 

Chinese companies that were found to be vital suppliers for Tesla included Ganfeng Lithium, a major maker of lithium products, with a chokepoint score of 6.8. Novoray, a major producer of inorganic compounds, scored 7.1, while Zhejiang Huayou Cobalt, which makes cobalt materials, rated at 5.7. 

An analysis of the shareholders of these companies shows Novoray and Huayou Cobalt are under the influence of China’s government, which indirectly owns 9% and 12% of their shares, respectively. 

US companies constituted 22% of the number of Tesla suppliers overall, while Chinese firms accounted for 17%. Tesla’s share of Chinese suppliers was 4 points higher than the percentage for General Motors. 

Tesla is working to boost the resiliency of its lithium supply chain. The company buys lithium from suppliers such as Albemarle and Livent as well as China’s Ganfeng, a report Tesla released in 2022 shows. The company also has started building a lithium refining facility, entering the business dominated by China.