Although neither side of the current trade war between China and the United States has directly targeted automobiles with tariffs, Tesla is still being hurt by the tensions between the two nations. Tesla is feeling the impact far more than any other carmaker.Tesla’s stock took a beating recently, dropping 6.3% and hitting its lowest share price since January 2017. The reason the electric vehicle (EV) maker’s stock is being targeted more so than others is because China is a major part of Telsa’s near-term plan to survive.
In January, Elon Musk broke ground on a Gigafactory in China, and the total investment in the project is expected to exceed $4 billion. This enormous outlay is worth it to Tesla because China represents a clear and immediate path to revenue, something the manufacturer still desperately needs if it is to stay afloat.
Traditionally, the tariffs for autos imported into China has been a 25% duty. These rates were lowered last year to 15%, but increased to a staggering 40% duty during the first round of the U.S.-China trade war. This necessitated Tesla increasing the price of its automobiles to pass on that tax. The current price for a Tesla Model 3 is approximately $73,000, with roughly $30,000 of that price being the result of China’s import tariffs.
If the current trade tit-for-tat boils over into affecting car imports directly, Tesla could very well see the very tight path to profitability disappear before its eyes. China is increasingly important to every auto manufacturer, and none more so than the newest and most consistent cash-burning carmaker on the block. On the other hand, if the trade war results in permanently reduced automotive tariffs, this current pain could be well worth it for Tesla.
Read the complete article > digitaltrends.com/tesla-hurt-by-trade-war
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