Tesla says it’s getting slammed in China because of tariffs

Qilai Shen | Bloomberg | Getty Images

A Tesla Motors Model S electric automobile at one of the company’s electric charging stations in Beijing on March 9, 2016.

The trade war between the United States and China is battering Tesla’s competitiveness, the company said when it released its third-quarter vehicle production numbers Tuesday.

In Q3, we were able to significantly increase Model S and X deliveries notwithstanding the headwinds we have been facing from the ongoing trade tensions between the US and China. Those trade tensions have resulted in an import tariff rate of 40% on Tesla vehicles versus 15% for other imported cars in China.

In addition, Tesla continues to lack access to cash incentives available to locally produced electric vehicles in China that are typically around 15% of MSRP or more. Taking ocean transport costs and import tariffs into account, Tesla is now operating at a 55% to 60% cost disadvantage compared to the exact same car locally produced in China. This makes for a challenging competitive environment, given that China is by far the largest market for electric vehicles. To address this issue, we are accelerating construction of our Shanghai factory, which we expect to be a capital efficient and rapid buildout, using many lessons learned from the Model 3 ramp in North America.

Shares of Tesla were largely unchanged in premarket trading from yesterday’s close of $310.70 a share.

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