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Tesla sues Trump Administration to end tariffs on the 'brain' of its vehicles

Kirsten Korosec
·3-min read
A Tesla Model 3 vehicle set to be delivered to a company employee moves off an assembly line during a ceremony at the company's Gigafactory in Shanghai, China, on Monday, Dec. 30, 2019.
A Tesla Model 3 vehicle set to be delivered to a company employee moves off an assembly line during a ceremony at the company's Gigafactory in Shanghai, China, on Monday, Dec. 30, 2019.

Tesla is suing the Trump Administration over tariffs on a computer chip and other parts it imports from China, joining an increasingly long list of similar lawsuits filed by hundreds of companies, including automakers Ford, Mercedes-Benz and Volvo.

Tesla, which names U.S. Trade Representative Robert Lighthizer in the lawsuit filed in the U.S. Court of International Trade, wants the court to declare the tariffs unlawful. Bloomberg was the first the report the lawsuit. Tesla is also seeking a refund for the tariffs it paid with interest. The lawsuit centers on two types of tariffs, a 25% duty enacted in 2018 and 7.5% tariff on hundreds of other products that went into effect last year.

Last year, the United States Trade Representative (USTR) denied Tesla's request for an exemption on a new custom chip built in China.

The custom chip is part of the company's advanced Autopilot 3.0 hardware that is intended to enable what the company describes as full self-driving (FSD) operation for all of its new vehicles. This hardware is now standard in all new Model 3, S and X vehicles. Customers pay an additional $8,000 for the software upgrade called FSD.

This hardware is contained within the Autopilot ECU (or engine control unit), a module that Tesla has described as the "brain of the vehicle."

The module is assembled in Shanghai, China, by a company called Quanta Computer. The module, along with a range of other electronics and products that are made in China and imported into the U.S., is subject to 25% punitive tariffs.

In its request to the USTR, Tesla said it was unable to source manufacturing for the Autopilot ECU 3.0 in the United States.

Tesla was unable to find a manufacturer with the requisite expertise to produce the Autopilot ECU 3.0 with the required specifications, at the volume requested and under the timelines necessary for Tesla's continued growth. This module is the brain of the vehicle. As such, the sourcing decision for this was not taken lightly nor simply on a cost basis. Autopilot is a complicated, safety critical feature of the Tesla experience where even the slightest imperfection can have major ramifications, so all of our decisions aim to decrease risk.

Tesla was also denied an exemption on the media control unit, or MCU, component of the Model 3's computing system. The MCU is a combination of three printed circuit board assemblies (PCBAs) enclosed in a mechanical chassis. The PCBAs include the media control unit which controls data going to and from the vehicle's touch display, audio speakers/microphones, radio, connectivity board (cellular internet), Bluetooth, Wi-Fi, USB charger, and back-up camera, the company explained in its request. The MCU is linked to and communicates with the vehicle's ADAS and connectivity board modules.

Updated: The current price of FSD is $8,000, which went into effect in summer 2020.