Tesla CEO Elon Musk says China’s new trade restrictions on rare earth magnets have affected the production of the company’s Optimus humanoid robots, which rely on the exports. 

Speaking on a Tesla earnings call on Tuesday, Musk said that the company was working through the issue with Beijing and hoped to get approval to access the critical resources.

China, earlier this month, imposed new export controls on seven rare earth elements and magnets used in everything from defense to energy to automotive technologies. The move was in retaliation for U.S. President Donald Trump’s escalating tariffs.

According to Musk, Beijing has asked Tesla to guarantee that the rare earth magnets under expert control will not be used for military purposes.

“China wants some assurances that these aren’t used for military purposes, which obviously they’re not. They’re just going into a humanoid robot,” he said.

The new restrictions, which have raised the risk of global shortages, require exporters of medium and heavy rare earths in question to receive licenses from China’s Ministry of Commerce.

China dominates the market for many of these rare earths, with the U.S. unprepared to fill a potential shortfall, according to the Center for Strategic & International Studies. 

Meanwhile, the Trump administration has into potential new tariffs on all U.S. imports of critical minerals in response to China’s export controls. 

Previously, Musk had announced plans for Optimus to produce about 5,000 units this year as the technology grows as part of Tesla’s future business plans. Moreover, he said that Tesla would deploy the robots in its EV factories. 

It’s unclear to what extent export controls might alter these plans. However, Musk reassured investors on Tuesday that the company still plans to produce thousands of robots this year, with thousands also expected to be deployed at Tesla factories.

The emerging technology could help Tesla drive some investor optimism as its EV business struggles, with its stock down about 37% year-to-date.

Steve Westly, founder and managing partner of The Westly Group and former Tesla Board member, told CNBC’s ‘Closing Bell Overtime‘ on Tuesday that the company needs to find a new growth engine soon. 

The company is expected to face stiff competition from other humanoid robot players in China, such as Unitree Robotics and AgiBot, both of which reportedly plan to enter mass production this year. The export controls could give the Chinese players another advantage over their U.S. competitors, according to some analysts.

While Musk is upbeat about Tesla’s prospects in the space, going so far as to claim that it is ahead of the competition, he is concerned that the leaderboard will be filled with Chinese companies.

Tesla is cautiously navigating an entry into India, CFO Vaibhav Taneja said on Tuesday in the U.S., as the electric vehicle maker faces falling sales and tariff threats. 

Speaking on an earnings call, Taneja confirmed reports that the company is working on an expansion into India, adding that it would be a great market to enter, thanks to its “big middle class.” 

Nevertheless, India is also “a very hard market,” with EV imports into the country subject to a 70% tariff and about 30% luxury tax, he said, noting that this could make India-sold Tesla’s twice as expensive, he said. 

“That’s why we’ve been very careful trying to figure out when is the right time… these kinds of things create a little bit of tension, which we are trying to work out,” he added. 

India has signaled interest in Tesla setting up a base in the country, though the country’s protectionist policies present some obstacles for the EV maker. 

Taneja’s statements come just days after Tesla CEO Elon Musk spoke with India’s Prime Minister Narendra Modi on topics including collaboration on technology and innovation.

Modi also met with Musk during his visit to Washington, D.C., in February, fueling speculation about Tesla’s plans for India. That same month, sources told CNBC-TV18 that the company was considering importing EVs from its Berlin plant into the country as early as April.

On India’s part, the government has proposed a new policy that could see EV tariffs fall from about 70% to 15% for firms that plan to localize some manufacturing in the country.  

Still, experts have told CNBC that Tesla would face price pressures under the scheme, with the company likely to push for further policy reforms.

However, American President Donald Trump’s new tariffs placed on U.S. trading partners, including India, could cast a cloud over potential negotiations between Tesla and New Delhi. 

Washington has imposed additional tariffs of 10% on India, but these could rise by 26% if a 90-day pause on Trump’s “reciprocal tariffs” ends without a U.S.-India trade deal. 

Vice President JD Vance met with Modi in India on Monday, hailing “significant” progress made in trade talks between the two countries. 

Tesla reported disappointing first-quarter results Tuesday, including a 20% year-over-year drop in automotive revenue and a 71% slump in net income.

Elon Musk said on Tuesday that he doesn’t like high or unpredictable tariffs, but any decision on what happens with them “is entirely up to the president of the United States.”

Speaking on his company’s first-quarter earnings call, with tariff-related uncertainty swirling across the economy, Musk said Tesla is in a relatively good position, compared to other U.S. automakers, because it has “localized supply chains” in North America, Europe and China.

Musk said Tesla is the “least-affected car company with respect to tariffs at least in most respects.”

Tesla reported troubling quarterly earnings and sales on Tuesday, including a 20% year-over-year drop in automotive revenue and a 71% plunge in net income. The company also said that it wasn’t providing any guidance for 2025 at least until its second-quarter update.

While Musk is one of President Donald Trump’s closest advisers, tariffs are the one issue where he’s partially broken with the administration. He recently called Peter Navarro, Trump’s top trade adviser, a “moron” and “dumber than a sack of bricks.”

On Tuesday’s call, however, Musk said, “If some country is doing something predatory with tariffs,” or “if a government is providing extreme financial support for a particular industry, then you have to do something to counteract that.”

Tesla’s stock price has been hammered since the president floated his plan for widespread tariffs earlier this month, and that was after the shares plunged 36% in the first quarter, their worst performance for any period since 2022.

Because Tesla manufactures cars that it sells in the U.S. domestically, the company isn’t subject to Trump’s 25% tariff on imported cars. But Tesla counts on materials and supplies from China, Mexico, Canada and elsewhere for manufacturing equipment, automotive glass, printed circuit boards, battery cells and other products.

Musk said he offers his advice to the president on tariffs.

“He will listen to my advice. But then it’s up to him, of course, to make his decision,” Musk said. “I’ve been on the record many times saying that I believe lower tariffs are generally a good idea.”

He added that he’s an advocate for “predictable tariff structures,” as well as “free trade and lower tariffs.”

Musk said Tesla’s energy business faces an “outsized” impact from tariffs because it sources lithium iron phosphate battery cells, used in his company’s cars, from China.

“We’re in the process of commissioning equipment for the local manufacturing of LFP battery cells in the U.S.,” he said. But he said the company can “only serve a fraction of our total installed capacity” with its local equipment.

“We’ve also been working on securing additional supply chain from non-china based suppliers, but it will take time,” he said.

Musk called Tesla the most “vertically integrated car company” but said that there are still plenty of parts and materials that come from other countries. Even though it’s built a lithium refinery in Texas, “we’re not growing rubber trees and mining iron yet,” he said.

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