Last weekend saw major increases in Tesla Model S and Model X prices
It seems the trade war with China finally caught up with Tesla. For a while, it looked like the U.S. based automaker would avoid the harsh reality of increased prices, stemming from the high import tariffs imposed by the Chinese government. The same tariffs that have been headlining both the US and Chinese news channel reporting these past few days. While Tesla clearly won't be the only carmaker impacted by the import duties, most other major car makers have already established their local presence in form of Chinese production facilities for their best selling models in the country.
Just recently, the Tesla was preparing a massive push within China. Coming as a direct result of a 40% reduction in import duties earlier this year, which arrived just in time for the Model 3 launch date. During that time, the prices of the Model S and Model X were decreased by a pretty appealing 40,000 to 90,000 yuan (~$6,000 to ~$14,000 USD), but it all came crashing down last weekend.
For Tesla, the plan was simple: ride the wave of reduced import duties until they could open up a local Tesla factory in China. The automaker even set up a new local company in the Shanghai Free-Trade Zone, but the timing was off and the factory is still a long way from coming online.
Elon Musk, Tesla Motors CEO, confirmed the Chinese factory story during a Q1 2018 earnings call. It was stated back then that the next Tesla Gigafactory will be opened in China. But it seems that the immediate effect of the import tariffs is hitting Tesla hard and will continue to hit hard until either Trump eases up his hardline policy or until the Chinese factory becomes operational. Whichever comes first. Meanwhile, the prices of Tesla vehicles are skyrocketing.
This last weekend saw the Tesla Model S and Model X prices increased by 150,000 yuan to 250,000 yuan (~$22,600 to ~$37,600), respectively, depending on version. This represents a significant price hike when compared to the percentages the automaker was relying upon: the original 25% import tariff was supposed to be cut to just 15%, but in turn, thanks to the emerging trade war between the United States and China, it skyrocketed to a whopping 40% for their vehicles.
Even with 25% import duties, Tesla Motors was doing well in China
Last year, the California-based carmaker managed to double its sales to over $2 billion in China. They even led the foreign electric car sales in the country, despite the likes of BMW and Volvo having their own, local factories there. Overall, Tesla represents a highly-coveted luxury status item that the sprawling Chinese upper middle-class aims for. While the tariffs may impact the overall sales volume, we don't expect Tesla to suffer that hard until their local Gigafactory comes online. After all, customers that are buying status symbol goods - like the Model S and Model X - won't be that much phased by the increased prices.
Tesla was among the last of the major car makers to announce plans to manufacture in China. With recent events unfolding, that might of been a poor decision after all. Tesla had a series of bad decisions and misderected actions in China, but the company managed to recover from all of them. We see no real threat to their expansion in the said country, barring some rather unexplicable move by the current POTUS, that is.