Tesla Cuts Prices In China By 12-26% To Absorb Increase Of Import Duty

Tesla

NOV 22 2018 BY MARK KANE 52

Tesla lowers prices in China, but Model S 75D starts at six digits (>$100,000) still.

Tesla once again adjusted prices of Tesla Model S and Tesla Model X in China, as demand weakened after China applied a 40% import duty (compared to the previous 25%).

According to Reuters, prices were lowered by 12-26% to make cars more “affordable,” since in July prices went up by 20%.

“We are absorbing a significant part of the tariff to help make our cars more affordable for customers in China,” Tesla said in a statement sent to Reuters.”

Currently, the website shows:

  • Model S 75D from 731,900 RMB (about $105,600)
  • Model X 75D from 794,800 RMB (about $114,700)

If Tesla absorbs higher tariffs, it means that it is willing to sell cars in China at lower margins compared to other markets.

Several years ago, when the Model S was first exported from U.S. – if we remember correctly –  Tesla was encouraging that prices will be about the same in every country and the differences are simply costs of transport, sales and taxes. Now, it seems that at least in China, the base price is lower.

Tesla is in tough situation in China because it needs to keep the business rolling at 40% import tax until it will be able to produce cars locally (Model 3), and maybe also perform some final assembly of Model S/X, like in the case of Europe (final assembly takes place in the Netherlands).

Source: Reuters

Categories: China, Tesla

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52 Comments on "Tesla Cuts Prices In China By 12-26% To Absorb Increase Of Import Duty"

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But what is the price in crore? 🙂

It makes sense to drop the Model 3 price because they’ll soon assemble them in Shanghai and get some tariff relief. I don’t really see the plan with S/X, though.

Speak like Elon, 2+ yrs = soon, not even close. Their China market share is already a joke, so this move is a Hail Mary, against USA-Trump self inflicted damage

Model 3s will roll off the Shanghai line by September. Mark my words.

Im no fan of trump, but to claim that these tariffs came about over 20 years ago. Yes, they were 25-30%, but, 25-30 vs 40 is not a big difference. The issue is that CHina was upposed to roll back their tariffs and instead have the most of any nation, save North Korea.

Crores are a unit of measurement in India, not China.

It’s not even a unit of measurement. It’s just a number. Crore = 10 million.

Just a little joke, the article on Honda’s EV gave the price in Yuan then converted it to crore.

Who competes against Tesla in China? Before you say BYD, look carefully at both line ups. Tesla is clearly the superior brand and having the Chinese make it even more expensive will further distinguish itself. It’ll be like reputation of Buick but in 21st Century.

No, not a superior brand, given their low and sinking market share there. Model 3 will not fare well there since it is an inferior product within their lineup, like the iPhone XR.

Seeing your “Logic” from your earlier posts, I’m thinking the opposite of whatever you say will happen.

Nio is considered a more or less direct competitor… Though I have no idea how well they stack up in actual quality or prestige.

Yes. You consider everybody a direct competitor to Tesla.
Not even close, at this time. Rimac is probably the closest and they are far too expensive.

Nio, maybe Jaguar I-Pace, Porche Taycan, Audi E-Tron, and many more in the coming 2-3 years.

Inventory sell off before a major tec change? I assumed that Tesla will push a bigger update to its Model S/X to the time when the (US-) tax credit starts to fade out to generate a new buying impulse. Now they need to get inventory out, where no “tax credit end demand rush” is to be expected.

If there were actually building cars for the Chinese market as inventory, it would make sense that they want to get rid of it — not necessarily because of a new revision, but simply to get rid of excess inventory in general, that they got stuck with after the duty hike. However, I don’t believe they actually do build inventory cars for the Chinese market?…

Keep business going until local production comes online, gross margins be darned I suppose.

Why doesn’t Tesla get compensation like the farmers do BTW? The trade war is a financial success for the US with Chinese companies largely absorbing the price increases while the government is raking in the billions so there should be plenty of cash for compensation. With a 40% tariffs plus incentive discrimination Tesla should be among those hit the hardest in this trade war.

Financial success??? Ask the US soybean farmers and grain resellers who have to destroy their crops when there are people starving in Africa. Yes, US bleeds discrimination, with armed troops at the border

The soy framers are compensated to the tune of $4.7 billion. “People starving in Africa” is neither here nor there, if anything with less demand from China there would have been more for Africa but apparently it ends up stored or destroyed instead. But yeah, “financial success” was probably wrong as I looked onesidedly at the difference between tariff induced price increases and tariff revenue, one has to factor in the damage of China’s counter tariffs to US exports as well so the judge is still out but I think there will be no winners in this war.

Note that success is defined here as higher taxes, bailouts, jobs more rapidly going overseas, and companies losing money. Could we at least have a ceremony to mark the end of free market capitalism?

Oh just a heads up, there are big tariffs on computer parts coming at the end of the year. This is a good time to buy if you like performance computing. +25% after the holidays. Though I guess you can buy next year if you like “government is raking in the billions.”

We’ll see how much of that 25% is absorbed by Chinese suppliers which in combination with the tariff money collected could be a pretty good deal though probably barely enough to make up for the losses caused by Chinese counter tariffs no doubt.

Anyway, how often do you buy computer equipment? At some point the Chinese will budge or producers will relocate to other countries, either result leading to more healthy trade relations with China. That’s worth some extra cost now I think.

agreed. In fact, I think that by America pulling our exports out of China, we may see some CO2 drops.
Now, ideally, Trump should tax locally consumed goods/services based on where the worst part/service comes from in terms of CO2/ $ GDP. If we verify this with satellites, America can get states and other nations to drop their CO2 in a fair fashion.

wow. things are that bad in China? Hopefully XI will do the right thing and stop China’s cold war against the west.

As for America, at this time, these tariffs have actually helped most local companies. Once Trump turns up the tariffs to 25% on the rest of the CHinese goods, starting in 2019, it is highly likely that we will have restarted factories in America and Canada, Europe, Mexico, Japan, S. Korea, and Australia will sell the rest to us.
IOW, China’s economy has already dropped 7%. They will likely drop another 7% or more come the new year.

No, it’s highly likely to tank the stock market and trigger a recession. Trump’s stupid tariff war, and tax cuts for corporations, are going to destroy the economy, likely sometime as soon as next year.

Well Tesla already has a big investment in China even at a lower margin it’s important to Tesla to keep selling in China. I still hope that Xi will except Tesla from the 40% tarriff to 15% or the 25% tarriff.
After all Trump excepted Apple phones made in China from the 25% tarriff.

Why would the Chinese do that? They don’t make exceptions for other car manufacturers that have spend billions on building plants in China. Once you start exporting cars from China you are getting in the territory of making demands.

you have it backwards. Once you build a plant in China, the Chinese gov has you by the short hairs.

uh no. The apple phone were exempted on that 2nd. Come the 3rd round in Jan, we will raise tariffs to 25% on ALL Chinese products, including the phones.

How top shelf of them. Pip, pip, cheerio.
Port and Cigars in the Ward Room.

China remains the top worldwide market for electric cars, so it’s better for Tesla to reduce it’s profit margins temporarily to gain or maintain a larger customer base than risk losing market share to other companies.

Yes, you are right with the approach, but the headwinds caused by US-Trump will doom them to invest billions there, then fare even worse than Japanese & Korean brands

???? trump caused NOTHING. Musk has spoken about going to China for 2 years now, back when O was president.

Building market share just for the sake of market share is bad policy. The real motivation is that they have running costs for their stores, superchargers etc. that they need to compensate with ongoing sales.

Bad policy? Are you sure? What does Amazon think of that strategy?
Given that a lot of the tariffs on Chinese products have been absorbed by the manufacturers, are they all unwise business people?
And really, I am not sure what the difference is between the motivation of “building market share” and “running costs” – both are the same really. Tesla is in a grow or die mode – part of that is running costs and you need to build market share to cover it.

Very likely that lots of car makers are eating various tariffs for now.

“Tesla is in tough situation in China because it needs to keep the business rolling at 40% import tax until it will be able to produce cars locally ”

Welcome to the kind of protectionist policies that the US is finally trying to fight against. China has done this for far too long.

I believe the reason China manufactures more products. Is American consumers look for the best price. So US companies set up there manufacturing plants in countries that have lower costs.
Kind of like the drug war if Americans wanted to stop drugs from coming into the country. All they have to do is Stop using drugs. Nobody ever held a gun to anyone’s head to use drugs the first time.

“Is American consumers look for the best price. ” Nope. The problem is that we have allowed box stores like Walmart and Target to take over whose buyers push Chinese made products. It has NOTHING to do with sales. I tried several years to get a product into Home Depot. Could not get it. Wrote the CEO, who had been pushing American made during W’s presidency. Within 2 hours, I was contacted by the Xmas buyer of HD. She liked it and then asked where I was going to manufacture. I told her America. She went ballistic and said that it had to be china. I did a lot of searching and found out why (from the horses writing). Here in America she hated buying our stuff because if meant that she stayed in America. Boring. BUT, when she went to China, she was to travel economy+ to business, stay at a decent hotel (like a Marietta or something similar; basically nothing fancy), and had meal compensation for average food. HOWEVER, the chinese gov had gotten ahold of her earlier and switched her to a first class on one of the Chinese airlines, put her up in a 5-star hotel,… Read more »

“Welcome to the kind of protectionist policies that the US is finally trying to fight against. China has done this for far too long.”

You misread. Tesla, a US company and major exporter, is rapidly moving to China as a result of US action and taking a loss along the way. China, our trade rival, is gaining a Tesla factory and will have cheaper vehicles and more high tech jobs as a result.

Yeah China lower the tariff from 25% to 15% and promised to buy 100 billion more from the US and protect intellectual property, This wasn’t enough of a win for Trump. He wanted to eliminate all trade deficits. Like we would actually be able to over night eliminate the trade deficit. So he imposed tariffs on 250 billion of Chinese goods. So Xi imposed another 25% on to the 15% tariff and now it’s 40%.
In the end it’s just a tax on the US and Chinese consumer we both pay more.
China said it no ones wins in a trade war. Trump said trade wars are easy to win. D.A.

and trump IS winning this war.

Yeah, uh no. The stock market is on the verge of tanking due to dumpy’s tariff war. Even his stupid tax cuts can’t keep the market pumped up. When tax time comes next year watch the market tank, if not sooner.

Tesla start this over 2 years ago. To try and blame trump for this is a joke.

It isn’t the purpose of a nation state to please other nation states but to serve its citizens.

Sure. What is your point? That the US led trade war is helping US citizens?
No right answer, not simple questions. Maybe now was the right time to go after China. I disagree with almost everything this administration has done but this one I am not sure about.
The fact is China has significant trade barriers – note the 25% import duty on cars before this recent increase. The other fact is that China does a terrible job with environmental protections (getting better though).
But either way – this move is big government picking winners and losers in the world economy. Makes the federal government more powerful for all the wrong reasons.

So much winning

Does this create a moral hazard? China collects 40% of CN MSRP as import tax (usd$40k per vehicle). Tesla lowers prices to compensate. So Tesla is effectively paying to CN national treasury usd$40k per vehicle to delay GF3 completion. When GF3 is able to produce vehicles, Tesla will possibly pay usd$10k per vehicle to CN cell manufacturers; plus GF3 employs (say) 5,000 workers at $600/month (150% of foxconn wage)= usd$3m/month. Tesla may need to manufacture 10x as many vehicles in CN as it was previously importing, to contribute more $ to CN economy than what they had been previously paying as import tax. That means they need to constrain supply, or make the price high enough. If the street price today is the same as it will be after GF3 opens, then sales will be flat, and CN interests receive more money for delaying GF3 than for completing it.

I wouldn’t call it moral hazard but I see your point. But $40k per car is not sustainable for very long and I think both sides would understand that.

They should Do The Same For CANADA Our Canadian Dollar is only worth $0.73 Cents in USD …A $60,000 Model 3 is Roughly $80,000 In CANADIAN Dollars , Then There is another 13% Tax On Top = $10,400 .. This Makes a Very Tough Decision Even If One Is Not Short Of Money , The New Ontario Government Took Away Our $14,000 EV Rebate.. That’s Roughly $90,000 CDN in Total * A BIG PILL TO SWALLOW *…I Love This Car But The Price Is Out Of This World . People Buy Small Houses for that Kind Of Money.. ..

THE MAJOR COSTS OF THE TESLA BATTERY ELECTRIC CARS ARE THE HUGE COSTS OF ITS BATTERIES, SO IF THEY MAKE THOSE BATTERY PACKS SEPARATELY USING LOCAL CHINA MADE BATTERIES FROM THE SAID NEW 400KWH/KG SOLID STATE BATTERY MAKER, QING TAO (KUNSHAN) ENERGY DEVELOPMENT CO. LTD., AND THEN INSTALL ON EACH OF THEIR IMPORTED BATTERY-LESS TESLA CARS INTO CHINA THEN THEIR FINANCIAL LOSS AND PAIN, DESPITE AMIDST THE TRUMP’S TRADE WAR WITH CHINA, IN MAINTAINING THEIR MARKET SHARE IN CHINA WOULD BE GREATLY REDUCED, PENDING TESLA’S COMPLETION OF THEIR GIGAFACTORY 3 IN SHANGHAI IS THE BETTER SOLUTION TESLA CAN SURELY ADOPT WITHOUT MUCH HASSLE SINCE TESLA ALREADY HAS EXISTING DELIVERY INFRA-STRUCTURES IN CHINA.

Ok. Of course at 400 kwh/kg, we could all be flying to work instead. Now .4 kwh/kg would still be fantastic.

Qing Tao hopes to build enough cells for 10,000 Model 3s in 2020. Tesla wants Shanghai to be at a 150,000/year rate before then.

Smart move by Tesla. Keep the momentum going with the S and X while production of the 3 and Y gets started. Next gen S and X are due in 2020, so expect production of both models to kick off in China as well right after ramp up of 3 and Y.

Then again the US has another presidential election in 2020 so the whole tariff nightmare in China and the rest of the world should end then as well.. Because the Roadster and Semi will need to be imported from the US as well.