Tesla Delivers the First Model 3's to China Ahead of Schedule

resource from: Reuters   

Tesla models being unloaded at a port in Shanghai

As trade tensions continue between the Trump administration and officials in Beijing, the looming threat of tariffs up to 40 percent on imported U.S. autos has electric automaker Tesla scrambling to make its first Model 3 deliveries to customers in China.

The electric automaker said in a statement that it held a delivery event in Beijing on Friday which "marked a significant milestone for the market".

State-funded Chinese news site The Paper also reported on Friday that a cargo ship carrying more than 1,600 Tesla Model 3 vehicles had arrived in Shanghai.

Tesla initially hoped to launch the Model 3 in China sometime in late March, so the automaker remains ahead of schedule, although the company still faces uncertainty over import tariffs which might affect Model 3 sales.

The Model 3 is Tesla's first mass-market car and China is a huge potential market for the automaker. Tesla is rushing to build a Shanghai factory to build the Model 3 for Chinese customers. However, the slowing of cars sales in China and the threat of higher tariffs being imposed on imports might derail Tesla CEO Elon Musk's Model 3 launch there.

The California-based firm has already adjusted prices and introduced a lower priced version of the Model 3 to make it more affordable to customers in China. The Model 3 starts at 433,000 yuan ($US 64,490) in China, while the performance version is advertised as $US83,405.

Tesla said the first deliveries will go to Chinese customers who placed their orders before the end of 2018. Buyers that ordered a Model 3 after Jan 1, 2019 will start receiving their cars by the end of March.

"I see its earlier-than-expected delivery as an effort to try and seize the market as quickly as possible" amid mounting competition, said analyst Alan Kang of LMC Automotive in an interview with Reuters.

"Many of its potential customers will not only be considering Tesla's Model 3 but also other electric car models like Jaguar's I-PACE or that from Audi and Mercedes-Benz," the Shanghai-based analyst added.

Tesla CEO Elon Musk and Chinese officials attended a groundbreaking ceremony for Tesla's Shanghai Gigafactory last month.

While auto sales in China have waned to 20-year lows as the economy slowed, Tesla's sales took an even bigger hit after Beijing raised tariffs on U.S. auto imports to 40 percent in July amid the tit-for-tat trade war. China has since temporarily suspended the additional 25 percent tariff, reducing it back down to the 15 percent level.

Chinese president Xi Jinping and President Trump met December at the G20 Summit held in Buenos Aires. The two world leaders met to to discuss trade talks and agreed to a 90 truce beginning Dec 1, with tariffs on imported autos remaining at 10 percent. However, the 90 day deadline is coming up on March 1, just as Tesla is launching the Model 3.

If the two sides fail to reach an agreement over trade by March 1, U.S. tariffs on $200 billion worth of Chinese imports are set to increase to 25 percent from the current 10 percent, and it is highly likely that Beijing will retaliate with higher tariffs of its own, like it did last summer when it raised tariffs on imported autos to 40 percent.

Right now, Tesla currently imports all of the cars it sells in China from its Fremont, California factory. However, the automaker's new Gigafactory in Shanghai will manufacture the Model 3 and help the automaker to minimize the impact of the trade war and avoid steep tariffs.

Another setback for Tesla this week was a report on quality issues with the Model 3. Consumer Reports in the U.S. removed it endorsement of the Model 3 sedan over reports of defects and Tesla's inability to service the affected vehicles in a timely manner. Some Model 3 owners reported a months long wait at service centers for replacement parts. Many of these parts come from Chinese suppliers.

It not just Tesla that is facing the threat of higher tariffs. According to data from CNN, the value of U.S. passenger car exports to China has fallen by $2.4 billion, or 30 percent, over the course of the first nine months of 2018.

resource from: Reuters

FutureCar Staff