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Tesla Claims Affordable Autonomous Cars Aren't Possible Without China

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【Summary】Because of tariffs that Donald Trump put into place on Chinese-made automotive parts and the U.S.’ government’s decision to reject a tariff exemption on Tesla’s brain for its Autopilot, affordable autonomous cars might not happen.

Original Vineeth Joel Patel    May 08, 2019 9:17 AM PT
Tesla Claims Affordable Autonomous Cars Aren't Possible Without China

President Donald Trump's 25% tariff on a variety of imports from China has sent a ripple throughout the entire automotive industry. The tariff has caused automakers to reconsider bringing vehicles to the U.S., like Ford with the Focus Active, and has seen brands warn that the 25% tax would increase the price of cars and cost thousands of jobs. Tesla is the latest automaker to feel the effect of Trump's tariff.

Trouble With Chinese-Made Parts

In May, Tesla's CEO Elon Musk unveiled the automaker's Autopilot 3.0 hardware. The system included a new chip that would enable the brand's cars to operate on their own, acting as fully autonomous vehicles. The concept soon went into reality, as consumers can now opt for the FSD upgrade for an extra $6,000.

As TechCrunch reports, this hardware can be seen as the "brain of the vehicle" and is assembled in Shanghai, China by Quanta Computer. Since the hardware is assembled in China, it falls under the U.S. government's tariff. Tesla looked for a way around this, requesting a tariff exemption from the government, but the request was denied.

Because of the tariff, Tesla has had to change its plans. TechCrunch claims that the tariffs could see the automaker find another country to make its hardware or delay further introducing the technology, which would impact safety.

"The imposed tariffs are forcing us to either source a new supplier, pass the cost increase to the end customer, or reduce operational costs within our internal operations, all having a reverse impact for what [we believe] to be the intention of the tariff," wrote the company in an application to the United States Trade Representative (USTR) on November 16 when the automaker requested exemption from the tariff.

Forget About Affordable Autonomous Teslas

Now that the government has officially rejected Tesla's bid, Musk claims that China is the only country that can deliver its hardware components on the automaker's strict deadlines. At the moment, Tesla states that it has a current timeline of six months, which includes development to production.

"Tesla was unable to source manufacturing for Autopilot 3.0 ECU in the United States," said a filing from the company. "We turned to industry experts who could achieve this quality and complexity in addition to the deadlines, which was not possible outside of China."

These parts are crucial to giving Tesla's models the ability to operate on their own, and because of the tariffs, consumers are now expected to pay the hefty price to upgrade their electric cars. To get full self-driving capability with a Tesla, consumers are expected to pay $6,000, which is a substantial amount. Ticking that box brings the price of Tesla's already-expensive cars to even higher prices. For the Model S, a base Standard Model with the equipment is $85,200.

With Trump's tariffs in place, the price of Tesla's fully autonomous system won't come down at all, but could eventually go up.

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