Tesla increases prices in China

10-JUL-18

Recently we've been getting a lot of questions on how the trade war between the U.S. and China will affect business in the short-run and ultimately their underlying share prices. Well today I come to you with a real life example in the automobile industry.

Tesla retail prices have surged more than $20 000 a piece in China this past weekend as a result of the trade tariffs imposed by Donald Trump; which went into effect on Friday the 6th of July, 2018. This surge is not going to affect the country China but it's going to hurt both the manufacturer on the demand side and ultimately the consumer who's buying the product.

How is the consumer getting hurt you ask? Basically the new trade tariffs raise the trade penalty on Tesla to 40%, meaning the retail price of a Tesla Model S goes from $107 000 to $128 000 overnight in China! The beautiful falcon winged SUV the Tesla model X goes from retailing at $117 000 to $140 000. This is a real tax on the consumer. This is sad because it comes after a time where the Chinese government reduced its tariffs on imported cars from 25% to 15%.

The Chinese market is the second biggest market for Tesla as things stand, with approximately 17 000 cars sold which made over $2 billion in revenues for the company in 2017. Yesterday reports were circulating saying that Elon Musk is planning to visit Shanghai where he's going to meet with the local leaders. Tesla registered a new company in Shanghai's Free-Trade Zone earlier in the year, which could only mean that they're planning on having another Gigafactory in Shanghai. This could counter some of the trade tariff woes in the long-term.