Tesla makes its entire vehicle lineup at factories in California and Texas, and that could give the electric-vehicle maker an advantage over rivals that are more exposed to President Donald Trump’s tariff regime, depending on which countries are hit and which are spared, analysts say.
For now, Trump has paused the application of 25 percent tariffs on Mexico and Canada that were to go into effect on Feb. 4 until March, and Trump did impose an additional 10 percent tariff on Chinese goods and said he’s looking at the European Union next.
“Tesla assembles five vehicles in the U.S. and all five rank among the most American-made cars,” Piper Sandler, an investment bank, said in a Feb. 3 research note. “Nobody is completely insulated, but in relative terms, Tesla is better positioned than most.”
Tesla’s Model 3 sedan, Model Y crossover, Model S sedan and Model X crossover are assembled in Fremont, Calif. The Model Y and Cybertruck pickup are built in Austin, Texas. The Cybercab robotaxi model is scheduled for production in 2026 in Austin.
‘Drastic changes’ are expected
Tesla’s domestic content led the industry at about 80 percent in 2024, according to a December report by American University’s Kogod School of Business. Honda was at 63 percent, and General Motors and Ford tied at 54 percent. The Made in America Auto Index includes parts, labor and other criteria for its estimates, the report said.
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“Changes to international trade agreements, and the possibility of new tariffs on foreign imports, will force automakers to develop alternative supply sources for their parts and vehicles,” said Frank DuBois, associate professor at the university. “We expect to see drastic changes in the amount of American-sourced content in vehicles sold in the U.S. as carmakers adjust to a new reality,” he said in the report summary.
Unlike Tesla, legacy automakers have a long history of building supply chains and auto plants in Mexico and Canada. Tesla CEO Elon Musk announced plans for a Mexico plant in March 2023 but paused the project in July 2024, citing the tariff threat if Trump was reelected.
Musk now serves as an adviser to Trump, heading the Department of Government Efficiency. Musk hasn’t commented on the tariffs on the X platform he owns. Musk often posts dozens of times per day on X regarding government matters.
GM, which has emerged as a key electric-vehicle rival to Tesla, imports multiple EV models from Mexico. They include the Chevrolet Equinox EV, Chevrolet Blazer EV, Cadillac Optiq and a model that GM makes for Honda, the Prologue. Ford, another top challenger to Tesla, builds its top-selling EV in Mexico, the Mustang Mach-E.
Tesla could see reduced profitability
But while Tesla is better positioned than many competitors, it’s not immune to rising costs from the Trump tariffs.
Tesla CFO Vaibhav Taneja acknowledged on a Jan. 29 earnings call that tariffs would reduce Tesla’s profitability. The EV maker also has factories in China and Germany that assemble the Model 3 and Model Y.
“There’s a lot of uncertainty around tariffs,” Taneja said on the call. “Over the years, we’ve tried to localize our supply chain in every market, but we are still very reliant on parts from across the world for all of our businesses. Therefore, the imposition of tariffs, which is very likely, will have an impact on our business and profitability.”
In the fourth quarter, Tesla’s automotive gross profit fell to 13.6 percent from 17 percent in the preceding quarter, according to a calculation by Reuters. Tesla said margins were reduced by discounts and promotions to stimulate demand.
Tesla sales fell globally last year to 1.79 million from 1.81 million a year earlier despite price cuts, discounts and financing promotions. In the U.S., Cox Automotive estimated Tesla sales fell 6.1 percent last year to 632,808.
“If the tariff on Mexico comes back in a month, then Tesla is going to be hurting,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. Based on government data, he estimated that about 20 percent of Tesla parts content comes from Mexico.
“The issue that everybody is dealing with at the moment is that if you continue to supply parts from Mexico or Canada after a tariff is applied, suddenly your vehicle is at a different price point or your profits are completely gone,” Fiorani said.