If there is anything that will define President Donald Trump’s second term, it is the issue of tariffs. Tariffs are seemingly a noble cause. They are meant to bring manufacturing back to the United States, and Tesla is often given as a benchmark in this regard. We have previously noted in another post that 95% of all Tesla cars that are sold in the US are assembled locally. That’s the ideal, right? Unfortunately, things are not that simple because, strictly speaking, not even a Tesla is 100% made in the United States.
What’s the attraction?
We have already noted that President Trump’s proposed 25% tariffs on automotive imports in the U.S is meant to bring manufacturing back into the U.S One of the biggest failings of the previous few decades was the fact that a lot of companies moved their operations to countries like China and Mexico, drawn by the prospect of cheap labor and cheap raw materials.
Unfortunately, that led to job losses. It also led to a severe weakening of the U.S’s manufacturing base. As such, there is a strong attraction for many to the call to buy American-made goods and services. That resonates strongly with President Trump’s desire to “make America great again.”
In this regard, people picture sprawling factories in Detroit, the heartland of American car manufacturing, churning out vehicles with pride and domestic components.
And while brands like Ford, GM, and Stellantis certainly have significant production within the United States, a closer look reveals a far more intricate and globalized reality. But perhaps surprisingly, even the poster child for American automotive innovation and manufacturing prowess, Tesla, falls under this complex umbrella.
That’s because strictly speaking, not even a Tesla, with its strong domestic presence, can claim to be 100% “made in the United States.” In fact, now that the relationship between the US and Canada has become strained, driving towards a disentanglement of the two countries’ automotive industries, the entire thing has become even more complicated, as we will explain later.
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Tesla “ingredients” by country
So, how much of a Tesla is actually made in the United States? That question is rather complex for one reason, the nature of reporting under the American Automobile Labeling Act (AALA)! Tesla, often cited as a beacon of American manufacturing, has indeed brought significant automotive production back to the United States.
Their Gigafactory in Nevada is a massive undertaking for battery production, and their factories in California and Texas handle vehicle assembly. This represents a significant commitment to domestic manufacturing compared to some traditional automakers. The graph below shows the composition of different Tesla models.
It is based on information provided in the National Highway Traffic Safety Administration’s (NHTSA’s) latest report showing the composition of a number of vehicles that are sold in the USA. The report was released on 30 October 2024. You can download it here.
Data in table format
To better illustrate the point, we present the above data in table format;
| Model | Content US/Canada | Content Mexico | Content Other Country |
| Model 3 | 75% | 25% | 0% |
| Model Y | 70% | 25% | 5% |
| Cybertruck | 65% | 25% | 10% |
| Model S | 65% | 25% | 10% |
| Model X | 60% | 25% | 15% |
A Brief Explanation
The data provided in the above section highlights that Tesla is indeed the most America of all the cars that are sold in the United States. It’s the reason why the company stands poised to benefit from the introduction of tariffs.
In this regard, the Model 3 has the most American content, at 75%. That’s followed by the Model Y, which has 70% American content. Meanwhile, the Cybertruck has 65% American content, similar to the Model S. Finally, the Model X is 60% made in America.
Why Canada is a Complicating Factor
You will notice that we have just been describing Tesla as having “American” content. This is where the Canadian complication comes into play. The reason for that is that Tesla does not separate US and Canadian statistics for any of its models.
As such, there is currently no way of knowing what percentage of the 75% of the Model 3 is actually made in the United States. All this is relevant, considering that Canada has turned out to be one of President Trump’s points of focus with regards to the issue of tariffs.
Tesla’s reporting is not without reason. In fact, the American Automobile Labeling Act of 1992 makes it mandatory for automakers to disclose the percentage of U.S. and Canadian parts content in their vehicles.
The unfortunate part is that the Act groups Canada and the United States as one entity. It’s the reason why Tesla and other manufacturers do not separate the two countries in terms of reporting.
Why not even a Tesla can be 100% Made in the United States
Tesla, for all its focus on vertical integration and domestic production, is not immune to the realities of the global supply chain.
- Battery Components: While Tesla is increasing its own battery cell production, particularly with its 4680 cells, the raw materials that go into those batteries – lithium, nickel, cobalt, manganese – are sourced globally. China, for instance, plays a dominant role in the processing of many of these critical minerals. Even if the final battery cells are assembled in the US, the journey of their constituent materials is international.
- Electronics and Semiconductors: Modern vehicles, especially Teslas with their advanced technology, rely heavily on semiconductors. The global semiconductor industry is highly concentrated in countries like Taiwan, South Korea, and Japan. While some chip design might happen in the US, the actual manufacturing often occurs overseas.
- Other Components: Like any other automaker, Tesla uses a vast array of other components, from seat materials to wiring harnesses, that are likely sourced from various international suppliers to meet quality and cost requirements.
A Globalized Supply Chain
It’s clear that a single vehicle, regardless of the brand or where it’s finally assembled, can contain thousands of individual parts sourced from dozens of countries. These components range from intricate electronics and specialized metals to basic materials like plastics and rubber.
Consider a modern car – any modern car. Its engine might have components manufactured in Germany, its transmission sourced from Japan, its advanced driver-assistance system (ADAS) relying on sensors from South Korea, and its battery (crucial for EVs like Tesla) potentially containing materials from various corners of the globe.
Even seemingly simple parts like tires or seat upholstery often have international origins. This intricate web of sourcing is driven by factors like specialization, cost efficiency, technological expertise, and the availability of raw materials. No single nation possesses a monopoly on all the resources and manufacturing capabilities required to produce a complete vehicle from scratch in a cost-effective manner.
A Look at Other Automakers
Tesla is not unique in this situation. An analysis of other popular cars sold in the United States reveals similar global sourcing patterns:
- Ford F-150: While assembled in the US, components like transmissions might originate from Mexico, and various electronic parts could come from suppliers in Asia. In fact, the F-150, an American icon, has only 45% of its components made in the US and Canada, according to latest NHTSA figures.
- Toyota Camry Hybrid: Toyota is a popular brand in the United States, mostly because of the reliability of it’s vehicles. The Camry Hybrid has 55% of it’s components made in the US and Canada, with 30% coming from Japan. The remaining parts come from the rest of the world.
- BMW X5: The BMW X5 is assembled in the US, though it still incorporates parts from Germany, Mexico, and other countries. In fact, only 32% of it’s components come from the United States and Canada.
The Broader Implications
So, what does it all mean with regards to President Trump’s tariffs. We have already noted that Tesla will likely be one of the winners when it comes to the 25% automotive tariff. That’s because it has the most Made in America parts of all vehicles on the market today.
However, the potential gains have been tampered by the fact that there has been a huge backlash both locally and internationally against Elon Musk, the company’s major shareholder. That could actually seen Tesla faring worse than the competition in these uncertain times.
In any case, the reality that even Tesla isn’t entirely “made in the United States” forces us to reconsider what that term truly means in the 21st century. Perhaps a more accurate way to think about it is “assembled in the United States,” acknowledging the significant domestic manufacturing presence while recognizing the global origins of the underlying components.