Tesla Seeking Tariff Exemption for the Chinese-made "Brain" of the Model 3 Sedan
【Summary】When the Trump administration slapped a 25 percent tariff on the Chinese-made components, one of the items was the processing unit used in the Tesla Model 3. Now Tesla is seeking a tariff exemption for it.
Like most automakers, Tesla works with a network of global suppliers that supply many of the parts for the company's electric vehicles. One such component, is the "brain of the Model 3, which is the car's computer processing unit or CPU.
When the Trump administration slapped a 25 percent tariff on the Chinese-made components, one of the items was the processing unit used in the Tesla Model 3. Now Tesla is seeking a tariff exemption for it.
"Increased tariffs on this particular part cause economic harm to Tesla, through the increase of costs and impact to profitability," the company said in a previously unreported request for tariff relief from the government.
Tesla is among a host of companies, including General Motors, to warn of growing costs related to the tariff war between the world's two largest economies.
The processing computer is used by Tesla in the car assembled in Fremont, California, was among $16 billion in imports that were hit with 25 percent tariffs by the United States Trade Representative's (USTR) Office in 2018.
In a redacted request posted on a government website by the USTR on Dec. 17, Tesla did not identify the company supplying the computer. However, the automaker did say it has been unable to find another manufacturer "with the required specifications, at the volume requested and under the timelines necessary for Tesla's continued growth."
Tesla, which called the Model 3's computer "the brain of the vehicle," added that "choosing any other supplier would have delayed the (Model 3) program by 18 months with clean room setup, line validation, and staff training."
Using a new supplier "substantially increases the risk of poor part quality that could lead overall vehicle quality issues that would impact the safety of our vehicles and the consumer acceptance of the final product," Tesla added in its request for tariff relief.
Tesla declined to comment on the tariff matter as of last Friday. But it has been aggressively cutting costs as it works to meet production goals for the Model 3, which has become a top-selling luxury sedan on the U.S. market.
Other automakers have sought similar exemptions but have not yet received an answer.
In July 2018, General Motors requested an exemption to a 25 percent U.S. tariff on its Chinese-made Buick Envision sport utility vehicle. The Envision accounted for nearly 15 percent of U.S. Buick sales last year, even as sales fell by 27 percent.
In October, GM also sought exclusions for about two dozen parts, including push button ignition switches and various transmission components. Nissan Motor Co and Fiat Chrysler Automobiles have also filed exclusion requests for parts. Ride-hailing company Uber asked for an exclusion for Chinese-made electric bikes rented through the Uber app.
The Trump administration has imposed 25 percent tariffs on a total of $50 billion in annual Chinese exports and 10 percent tariffs on an additional $200 billion in Chinese exports, which led to escalating trade tensions between the two countries. The tariffs were in response to what the Trump administration calls China's unfair trade practices.
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