Musk Assures Investors of Optimus Mass Production as Tesla Grapples With China’s Rare Earth Restrictions

Elon Musk has highlighted the impact of Chinese rare earth restrictions on Tesla’s Optimus humanoid robots for the first time, CNBC reported. Musk said production of the humanoid robots relies on China’s rare earth magnets whose export has been affected by trade restrictions.

Elon Musk’s Rare Earth Shortage

Early this month, China introduced new export controls on seven rare earth magnets and elements. These rare earth components are necessary in production of numerous technologies, including automotives and robots as well as energy and defense technologies. China’s move was in retaliation to tariff escalation by US President Donald Trump.

Speaking during Tesla’s earnings call on April 22, Musk said the EV manufacturer was discussing the matter with Beijing. He added that the company hopes to get China’s approval to access the important resources. Musk also said that China has requested Tesla to provide a guarantee that the controlled rare earths 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.

China’s rare earth ban has triggered global shortage risks. The Asian economic giant requires entities that export heavy and medium rare earths to get licenses from the Ministry of Commerce.

China dominates the market for most rare earths. According to the Center for Strategic & International Studies, China’s export restrictions expose US vulnerability to rare earth supply chains. However, the North American country is not prepared to fill the potential shortfall. The US needs rare earths to develop a range of advanced defence technologies, including fighter jets, missiles, submarines, drones, and radar systems.

Tesla’s Optimus Plans

Previously, Musk said that Tesla plans to deploy its humanoid robot in its factories. Although it remains unclear how China’s export controls could disrupt humanoid robot manufacturing in the company, Musk went ahead to reassure investors that Tesla was still planning to manufacture 5000 Optimus robots this year.

He also underscored the critical role of its humanoid robots in Tesla’s future plans on Tuesday’s earnings call.

“The future of the company is fundamentally based upon large scale autonomous cars and large scale, large volume and vast numbers of autonomous humanoid robots,” he said.

The EV manufacturer plans to make its robotic technology an integral part of the company’s future business plans. Musk said that Tesla will be deploying thousands of Optimus robots to perform different tasks in its EV factories. This emerging technology could enable the company to drive investor optimism in the current environment where its EV business is struggling. Tesla stocks have dipped 37% since the beginning of this year.

Need for New Growth Engine

But as Musk focused on expanding Tesla’s influence in the robotic and EV space, former Tesla Board Member Steve Westly argues that the company should focus on identifying a new growth engine.

In the robotics industry, Tesla will be facing fierce competition from Chinese humanoid robot firms like AgiBot and Unitree Robotics. The two companies are planning to commence mass production of their humanoids by the end of this year. When it comes to scaling production, China’s rare earth export restrictions place Chinese firms at a significant supply chain advantage over their US counterparts.

“China continues to show the most impressive progress in humanoid robotics where startups are benefitting from established supply chains, local adoption opportunities, and strong degrees of national government support,” Morgan Stanley said in a research note back in February 2025.

Although Musk remains optimistic about Tesla’s prospects in the humanoid robots industry, he has concerns about Chinese companies taking leadership in the industry.