Tesla is rushing Model 3's to China ahead of tariff deadline
- In advance of the March 1 tariff deadline, Tesla is shipping as many Model 3 sedans to China as possible, according to Bloomberg. At least three ships carrying the cars are set to arrive at Chinese ports this month in an attempt to miss a pending increase on $200 billion in Chinese goods that would trigger a retaliatory response should a new deal not be struck by March 1, according to the report.
- The Model 3, Tesla's cheapest car, is not yet available in China and deliveries on preorders are slated for this spring.
- "Our whole focus is, okay, how do we get those cars made, get them on a ship as fast as possible ... get those cars to customers as fast as possible. We get them to China as fast as possible," Tesla CEO Elon Musk said on a recent earnings call.
Musk said on the same call that regardless of demand, he is focused on getting as many Model 3's into China as possible.
Tesla has been chaffing against tariffs coming from both sides of the trade war, but the previous 40% duty on American cars coming into China was particularly painful. In October, the company explained that the combination of tariffs and ocean freight costs was putting Tesla cars at a 55% to 60% cost disadvantage with comparable Chinese models.
When the 90-day tariff cease-fire began on Jan. 1, China dropped the 40% tariff on U.S. cars by 25% — an additional rate that had been added earlier in the year as tensions escalated. That cease-fire is set to come to an end March 2 if a deal is not reached, though lately, President Trump has indicated the deadline may be softer than previously stated.
"Our car is just very expensive going into China. We've got import duties. We've got transport costs. We've got higher-cost labor here. And we've never been eligible for any of the EV tax credits," said Musk in January. On the call, he explained that Tesla is the only automaker to have a wholly-owned manufacturing facility in China. But its Shanghai factory isn't yet online. It's expected by the end of the year, Musk said.
Automakers have expressed varied levels of pain from the U.S. trade war with China. General Motors CFO Dhivya Suryadevara described the situation as a "$1 billion headwind," on the company's fourth-quarter earnings call last week. And auto-parts manufacturer Cummins said it was able to fully mitigate the impact of tariffs, in part by raising prices. BMW has previously valued its tariff pain at more than $300 million and the company's North America CEO Bernhard Kuhnt said yesterday on CNBC that an additional rise in tariffs would be bad for the consumer, auto dealers and "the economy in total."
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