Price listings on Tesla’s Chinese website increased by nearly 20% this weekend. It came after the U.S. and China on Friday imposed tit-for-tat tariffs on $34 billion of each other’s goods, which affected U.S.-built cars exported to China including Teslas.
The Silicon Valley electric-car maker had briefly cut prices by about 6% after the Chinese government reduced its tariffs on imported cars to 15% from 25% on July 1.
But that cut proved short lived. The measures imposed Friday raised the tariff on Tesla to 40%.
A basic Model S sedan now costs roughly $128,400, up from $107,300 last week, while a Model X sport-utility vehicle costs $140,100, compared with $117,100.
A Tesla dealer in Beijing said there were still some cars in stock with lower price tags that were delivered before the new tariffs were imposed, but that inventory was very low.
Tesla plans to build a plant in Shanghai to serve the local market, but for now it only produces vehicles in the U.S. Last year, it sold about 17,000 cars in China, its second-biggest market globally, generating more than $2 billion in revenue.
Unlike most auto makers, Tesla sells its cars through company-owned stores instead of franchised dealerships, allowing it to set prices. It has 30 stores in China, according to its website.
The tariffs the U.S. and China imposed on each other present companies with a dilemma: Risk a loss by absorbing the cost or risk market share by passing it on to consumers. Beijing has been looking for ways to shield its companies and consumers, for example by trying to direct purchases of soybeans to Brazil and other suppliers.
China’s Commerce Ministry said Monday it would use the added revenue from the increased tariffs to provide relief for affected companies and workers. Also Monday, the executive office of the State Council, China’s cabinet, issued a notice Monday calling for an increase in imports while stabilizing exports to promote more balanced trade, the state-run Xinhua News Agency reported.
Tesla isn’t the only auto maker that builds in the U.S. and ships to China: BMW AG , Daimler AG and Ford Motor Co. all sell U.S. imports in significant volume here.
Last week, Ford said it has no current plans to raise retail prices on its China imports in response to the tariff hike. Ford sold roughly 65,000 imported Lincoln vehicles in China last year, as well as nearly 19,000 Fords. Locally produced cars comprised more than 90% of its sales.
Daimler said it didn’t plan to pass the entire cost of the tariff rise onto its customers.
Sales of high-end imports such as Tesla’s are unlikely to be hit severely by the price increase, according to analysts, since buyers of luxury cars tend not to be price-conscious.
But the pain will spread if the trade war continues, a saleswoman at an import-export company based in Shandong province predicted.
The company imports U.S. auto parts that are subject to the new tariffs, which means higher prices for its Chinese buyers. They are negotiating with American suppliers on how to divide the higher costs, she said, but they will most likely be absorbed by her company, the saleswoman said.
“In the short term, our vendors are still talking and discussing prices,” she said. “But in the long term, I think it will definitely have an impact on our business.”
Source: Wall Street Journal by Trefor Moss
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