Tesla CEO Elon Musk recently announced that the electric motor in the company’s upcoming Cybercab uses no rare earth elements, a development he described as “extremely hard to achieve” while maintaining the vehicle’s range. This claim has sparked discussion about whether this innovation could significantly alter electric vehicle (EV) supply chains or diminish China’s dominant position in the rare earth market—a critical component in EV manufacturing and a focal point in U.S.-China trade tensions.

Rare earth elements, such as neodymium and dysprosium, are essential to producing the high-performance permanent magnets used in many EV motors. China currently controls approximately 70 percent of global rare earth mining and about 90 percent of processing capacity, giving it a substantial strategic advantage in the supply chain for EVs and other advanced technologies. Beijing’s control over these minerals is viewed as a crucial factor in ongoing geopolitical competition, especially as the United States seeks to reduce dependence on Chinese supply chains.

Industry analysts caution that Tesla’s rare-earth-free motor is unlikely to upend the broader market or eliminate China’s leverage in the near term. David Zhang, general secretary of the Shanghai-based International Intelligent Vehicle Engineering Association, described the motor as still largely a “commercial concept” whose efficiency and performance compared to conventional rare-earth-based motors remains unproven. Zhang noted that Tesla had previously used rare-earth-free AC induction motors before switching to rare earth permanent magnet motors with the Model 3 in 2017, due to their superior performance. He predicted that permanent magnet motors will continue to dominate in new energy vehicles globally over the next five years.

Alfredo Montufar-Helu, managing director at Ankura Consulting in China, emphasized that while the innovation may contribute to reducing rare earth dependency within certain motor components, it would not eliminate rare earths from EV supply chains altogether. Rare earth elements are utilized in multiple vehicle systems beyond motors, including sensors, infotainment, and electronic displays. “A rare-earth-free motor wouldn’t remove rare earths from EV supply chains; it would just narrow where they show up,” Montufar-Helu said.

Senior economist Xu Tianchen of the Economist Intelligence Unit also urged caution, noting it was premature to view Tesla’s development as a turning point or to conclude that China had lost its strategic advantage. He pointed out that intellectual property constraints could limit other automakers from adopting the technology swiftly and that rare earths remain critical to a wide range of industries beyond EVs, including defense equipment.

China’s rare earth exports have seen a significant decline recently, with customs data reporting an 18.25 percent year-on-year drop in volume last month. This reduction reflects Beijing’s ongoing efforts to tightly control shipments of these vital minerals amid escalating global strategic competition.

While Tesla’s technological advances may contribute to diversifying EV motor designs, experts conclude that China’s dominant position in rare earth production and processing, as well as their broad industrial applications, will likely preserve its supply chain leverage for the foreseeable future.