Trade war drives up Tesla's prices in China

The price of a Tesla rose in China as a result of the first round of retaliatory tariffs as part of the nascent trade war with the United States. Tesla Models S and X now cost 150,000 yuan to 250,000 yuan more (about $ 22,600 to about $ 37,600) after the 40% increase in import taxes, according to Electrek and The Wall Street Journal

Cervical whiplash comes just a few months after China cut import taxes on foreign automakers' cars from 25% to 15%. This has reduced, in some cases, up to about $ 14,000 from the price of Tesla's more expensive models.

The auto industry is only one of the many victims of the trade war that President Trump has started with China. But it is particularly vulnerable to volatility because automakers are sourced from a globally distributed supply chain, the largest rely on multiple continents, and there are low margins in the high cost cars (eg, soy beans).

In response to the tariffs, some car manufacturers tried to get behind the wheel by sending as many cars as possible before the arrival of the new rates. And most have, up to now, resisted the implementation of their own price increases.

Compared to the world 's Daimler and Ford, however, Tesla is still a low – volume operation So it' s not surprising that it 's the only one. one of the first to change its prices. China is also a key market for Tesla, accounting for about 17% of the company's revenue in 2017, according to Reuters .

Even with a high price before the new rates, Teslas is well sold in China compared to other cars. The company is the leading foreign manufacturer of electric vehicles by sales, overshadowed only by some of China's largest domestic EV vendors. And there is room to grow. The country's aggressive push to phase out fossil fuels, as well as its size, make it the largest market for electric cars.

One way to avoid being caught in the crossfire of import duties is to build cars in China. Many automakers are already doing this, despite the fact that China is forcing foreign automakers to partner with local manufacturers to manufacture domestically. (This is a move that ultimately reduces profits and also puts business secrets in jeopardy, say some companies.)

Even in the face of this, Tesla has spent the last two years trying to get a room for a new Gigafactory in China. But the Chinese government has recently announced that it plans to change these rules, the limitations being initially lifted specifically for companies that manufacture electric vehicles. This could make it easier for Tesla to set up a manufacturing facility in China, and there are signs that the company is already doing it.