The auto industry needs a break. At every turn, automakers find themselves facing a new decision on tariffs or the backtracking of a decision that prompted a boardroom full of stakeholders to spend millions of dollars to mitigate. They’re tired of the uncertainty. So am I, and I bet you are, too.
Welcome back to Critical Materials, your daily roundup for all things electric and tech in the automotive space. Today, automakers breathe a bit easier as they learn of a possible tariff exemption for imported auto parts. Also, Xpeng dumps Nvidia for in-house silicon and insurance rates for Teslas are skyrocketing. Let’s jump in.
30%: U.S. Floats Auto Parts Tariff Exemption Because Automakers ‘Need A Little Bit Of Time’ To Move Manufacturing
Photo by: White House
The great tariff saga of 2025 continues with all of its twists and turns. This week’s flip-flip of the so-called “bipolar tariff regime” is directed at the auto industry. The Trump administration is considering throwing automakers a lifeline with a potential exemption on imported auto parts, which are hit with a 25% tariff starting next month.
Speaking to reporters at the Oval Office on Monday, Trump confirmed that he was considering additional action to help automakers deal with tariffs.
“I’m looking at something to help car companies with it,” said Trump in an interview with reporters on Monday. “They’re switching to parts that were made in Canada, Mexico and other places, and they need a little bit of time because they’re going to make them here.”
It would be one thing if the tariffs on automakers were just on completed vehicles. But they’re not. The tariffs are also set to be applied wholly to automotive parts. To make matters worse, the supply chain for vehicles often has parts moving through U.S. borders multiple times in various stages of the product lifecycle—even if the final assembly doesn’t happen on U.S. soil. That web of manufacturing can quickly become engulfed in extra duty fees, which ultimately means a higher cost for you, the consumer.
The Trump administration’s goal is to convince automakers to localize production in the U.S. completely. And while some automakers are shifting more and more production Stateside, it’s important to remember that even the most made-in-the-USA cars truly are global products. And it finally appears that the team behind the import taxes realized that the entire auto industry can’t just upend an entire worldwide supply chain and not be disrupted.
Automotive News explains the potential relief to automakers:
The president’s comments could potentially bring relief to automakers reeling from his duties on car and light truck imports, but they also inject further uncertainty into his tariff plans. Shares of General Motors, Ford and Stellantis hit session highs after Trump’s comments, reversing earlier declines.
Levies on auto imports have threatened to raise prices for American consumers and wreak havoc on auto supply chains, which are deeply integrated across the U.S., Canada and Mexico. Trump has argued the duties are necessary to revive American manufacturing.
Trump imposed a 25 percent tariff on fully built vehicles, with duties on parts set to take effect no later than May 3. His tariffs on Canada and Mexico already contain a carveout for vehicles with enough domestic content to meet requirements under the existing North American trade agreement.
Executives from Detroit’s Big Three have been practically begging the White House to ease up on the auto industry for weeks. Spare the small stuff, at least, even if fully assembled imports and large items like motors and transmissions are taxed. They know that broad industry-wide tariffs will cost billions and trigger massive layoffs. Perhaps even ironically, tariffs would kneecap the entire manufacturing sector they’re meant to bolster.
Even if parts get a temporary pass, the overall ride likely won’t get smoother. Automakers are clinging to every bit of good news they can get, but until an actual exemption is finalized, there’s no reason to think this rollercoaster ride is over.
60%: Nvidia Dumped By Xpeng Thanks (Sorta) To Biden-Era AI Export Ban
Xpeng just pulled a slick “it’s not me, it’s you” with Nvidia—or, rather the U.S. government as a whole. The break-up is at least partly due to a Biden-era rule surrounding hardware capable of inferring artificial intelligence tasks.
The automaker officially confirmed that its next-gen cars will be powered by in-house silicon (aptly named Turing) that is three times as powerful as Nvidia’s outgoing hardware already installed in its EVs. More importantly, the hardware could begin shipping as early as this quarter.
One of former U.S. President Joe Biden’s final outgoing rules revolved around limiting U.S. AI tech that could be exported to certain countries. Nvidia’s Drive platform—which serves as the semi-autonomous backbone for Chinese automakers like BYD, Geely, Xiaomi, Xpeng and Zeekr—falls under one of the affected Export Control Classification Numbers.
That’s not the sole reason for the split, though. Xpeng, like other Chinese OEMs, has been working on its own silicon for some time. However, the brand notably accelerated its efforts in recent months just ahead of the announcement of the Biden administration’s AI Diffusion rule.
Another reason is reportedly performance. Nvidia boasted around this time last year that Xpeng would utilize its Drive Thor platform for future self-driving vehicles. However, the GPU maker has reportedly had some issues scaling Thor to meet its original performance needs. According to CNEVPost, which cites a report from 36kr, Thor was only able to achieve about 37.5% of its stated performance.
Here’s the kicker: Xpeng’s Turing chip isn’t more powerful than Nvidia’s promised specs. In fact, it’s actually slightly weaker than Nvidia’s Thor chips at their current reported underperforming specs by just under 7%. However, the Turing chip is three times as powerful as the outgoing Orin X chips and is developed in-house, which means that the tech isn’t at risk of export regulations from the U.S.
Ironically, Trump recently announced that he was placing the Biden-era AI Diffusion rule on hold. The news of the pause broke last week following Nvidia CEO Jensen Huang’s attendance at Trump’s $1-million-per-head dinner at Mar-a-Lago. So the Biden policy may now be moot, but not before the message had been received.
If nothing else, this move should go to show just how quickly China’s automakers can move when poked. These marques are taking on the king of AI—the third most valuable company by market cap in the world right now. If all goes well, it could spell a power shift for China’s reliance on U.S.-developed computing for its future self-driving needs.
90%: Tesla Owners Are Getting Hammered By Soaring Insurance Rates
Photo by: Andrei Nedelea
Owning a Tesla used to be a statement. It still kind of is, albeit not necessarily a positive one anymore. That’s made Tesla’s vehicles a target of vandalism, which—as expected by experts last month—has contributed to the rapidly rising insurance premiums felt by owners over the past year.
According to a new study from Insurify, Tesla drivers face insurance rate hikes that are almost triple that of the average car owner. While the average policy owners have seen increases of around 10% year-over-year, Insurify’s data shows that the Tesla Model Y in particular faces a hike as high as 29%. Yikes.
According to the study, the average annual insurance premium has risen to $3,996, or around $333 per month, making the cost to insure the car annually around 9% of the vehicle’s base MSRP. This is an increase of $893 year-over-year from $3,103 in 2024.
Following closely behind it is the Model 3 at 24%. Insurify says that the average annual cost is actually higher than the Model Y at $4,364—10.3% of its base MSRP—increasing $858 year-over-year from $3,506 in 2024.
While the Model S didn’t make it into the top 10, the Model X came in third. The same data shows an annual coverage cost of $4,046—4.8% of the EV’s base MSRP—to insure it each year. That was a 22% uptick of $731 from its 2024 policy average of $3,315.
From Insurify’s study:
Every model among the 10 with the fastest-rising insurance costs is an EV or hybrid, or has an EV or hybrid option in addition to a gas-powered version. Gas-powered vehicles are less expensive to repair and therefore cheaper for insurers to cover, according to a Mitchell report.
Three Tesla models saw the sharpest increase in full-coverage insurance costs between 2024 and 2025, with the rates for the Tesla Model Y rising 2.9 times faster than the national average.
Insurify notes that the case for Tesla’s higher insurance rates is two-fold. First and foremost is an EV problem: the average insurance claim for an electric car is 17% higher than gas-powered equivalents. Second: Tesla is just more expensive to repair than pretty much every other EV out there. EVs from other automakers have an average repair cost of just $269 more than a gas-powered equivalent. But Tesla? Try $1,347.
More from Insurify:
EV and hybrid insurance claims cost insurers more than gas-powered vehicle repairs, according to a 2024 report by Mitchell. The average claim for EVs costs $5,560, or 17% more than the $4,741 average for gas-powered vehicles. Plug-in hybrid electric vehicles (PHEVs) have an average claim cost of $5,229, 10% more than gas-powered cars.[1]
Tesla repairs push up the average claim cost for EVs. A damaged Tesla costs $1,347 more to repair than a gas-powered car, on average. EVs from other manufacturers are only $269 more expensive to repair than gas-powered cars.[2] Non-modular Tesla batteries need to be replaced when slightly damaged, unlike modular batteries, which are often repairable at a lower cost.
As if Tesla didn’t have enough hits against it right now, the punches keep on coming. Slipping sales, values circling the drain and a CEO so intertwined with politics that the brand is suffering—and now the cars are also becoming more expensive to own, too.
100%: Have Insurance Rates Ever Caused You To Rethink Your Car Choice?
Photo by: InsideEVs
Tesla has been trying to combat high insurance rates for years. It’s one of the reasons that the automaker launched its own insurance product. That’s obviously done little to improve the problem overall.
That got me thinking about just how I’ve shopped around for cars. The very last thing I do is quote out insurance. And often, it’s after I had already made a decision on the car and trim that I wanted and picked out a car on the lot. I guess that’s not very adult of me.
That being said, I want to know if I’m alone here. Have any of you decided on a car only to realize just how much insurance was going to cost and walk away? If so, I want to know about it. Jump into the comments and share your story.
