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Tesla is Once Again Raising Prices in China as the Sino-U.S. Trade War Drags On

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【Summary】U.S. electric vehicle maker Tesla Inc will raise prices in China on Friday, earlier than planned, and is considering increasing prices again in December should Chinese tariffs on U.S.-made cars take effect.

FutureCar Staff    Aug 26, 2019 3:15 PM PT
Tesla is Once Again Raising Prices in China as the Sino-U.S. Trade War Drags On

SHANGHAI (Reuters) - U.S. electric vehicle maker Tesla Inc will raise prices in China on Friday, earlier than planned, and is considering increasing prices again in December should Chinese tariffs on U.S.-made cars take effect, Reuters has learned.

The people declined to be identified as the plan has not been made public. A Tesla representative did not immediately respond to Reuters' request for comment on Monday.

Tesla is among many U.S. companies impacted by China-U.S. trade tensions. Tesla currently imports all the cars it sells in China from its Fremont, California assembly plant and has had to adjust prices multiple times over the past year in response to tariff changes.

Reuters reported this month that Tesla was considering to lift prices in China from September after the yuan weakened significantly against the U.S. dollar. One person told Reuters on Monday that the automaker was bringing forward these plans to Aug. 30.

Both people said the automaker is now also mulling another price hike in December after China's commerce ministry last week announced it would reinstitute tariffs of 25% on vehicles and 5% on auto parts which it suspended in December, in the latest tit-for-tat escalation of the trade war.

"Tesla will also try to ship more cars to China before December, before the tariff hikes," said one of the people.

In May 2018, Tesla lowered its prices in China after the Chinese Finance Ministry said that it would cut import duties on passenger vehicles from 25% to 15% beginning July 1, 2018. However by early July, the relationship between the Trump administration and Beijing soured again.

In early July, China slapped retaliatory tariffs of 25 percent on imports of several U.S. products, including cars, after U.S. President Donald Trump imposed tariffs on $34 billion worth of Chinese goods, prompting Tesla to once again raise prices in China.

Tesla's vehicles already cost significantly more in China due to high import tariffs. The Model S for example, starts at $79,990 in the U.S.

Currently Tesla offers two versions of the Model S in China, an all-wheel-drive Long battery version starting at 776,900 ($108,638) and the Performance High Performance Edition for 875,700 yuan ($122,453). Customer who opt for Tesla's Autopilot advanced driver assist feature are charged an additional 56,000 yuan ($7,832).

Tesla mass-market Model 3 starts at 328,00 yuan in China ($46,866) for the standard rear-wheel-drive version. Like the Model S, Tesla currently imports all of its Model 3s from California.

However Tesla's Shanghai Gigafactory 3 is currently under construction in the country's free-trade zone. The new factory, which Tesla hopes is operational by the end of the year, will produce battery cells along with Tesla Model 3 and upcoming Tesla Model Y crossover. 

Once the factory is operational, Tesla will avoid import tariffs for the Model 3 in the world's biggest auto market. It's an important milestone for Tesla, as the electric automaker is relying on the Model 3 sedan to reach and maintain profitability.

Tesla is targeting an initial production rate of 250,000 electric cars per year at the new factory. 


resource from: Reuters

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