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Trade War Escalation Forces Tesla To Raise Chinese Prices Earlier

Tsvetana Paraskova

Tesla will raise the prices of the vehicles it sells in China as early as this week, in response to the latest escalation of the U.S.-China trade war in which Beijing threatened to slap up to a 25-percent tariff on U.S.-made vehicles.

Tesla had originally planned a price increase for September, but it will raise the prices of its electric vehicles sold in China on Friday, August 30, a Tesla sales representative and another Tesla employee told Bloomberg on Monday.

The U.S. electric vehicle maker is also considers another price hike for the Chinese market in December, if China follows through with its plan to reinstate the tariffs on U.S. cars and auto parts that it had suspended last December, people familiar with the plans told Reuters.

Currently all Tesla cars sold in China are made in the United States and then shipped to China, which adds logistics costs, import tariffs, and the risk of additional tariffs if the trade war further escalates. The imported Tesla vehicles are not eligible for subsidies either. The yuan depreciation in recent weeks is also hurting Tesla because the yuan is now at a decade-low against the U.S. dollar, shrinking Tesla’s profits when Chinese yuan are converted into U.S. dollars.

Tesla has started the construction of a production facility in China in order to be able to compete on a level playing field with a growing number of local EV manufacturers.  

In January this year, Musk joined the mayor of Shanghai for the groundbreaking ceremony of Tesla’s first factory outside the U.S. and in the world’s largest EV market, China. 

Tesla aims to finish the initial construction of the Shanghai Gigafactory this summer, begin production of Model 3 by the end of this year, and reach high volume production next year, Musk wrote on Twitter on the day of the event in January.  

By Tsvetana Paraskova for Oilprice.com

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