Elon Musk has recently begun construction on his Gigafactory in China. This could potentially allow him to escape from the tariffs that have been rising with President Trump’s trade war with China.
More Cars
Elon Musk and Shanghai officials first announced the Gigafactory in July [1]. Now, the building should be finished by the end of 2019. The factory will be producing versions of Tesla’s Model 3 and Model Y for China according to Musk.
Shanghai Giga will produce affordable versions of 3/Y for greater China. All Model S/X & higher cost versions of Model 3/Y will still be built in US for WW market, incl China.
— Elon Musk (@elonmusk) January 7, 2019
Trade War
Lately, the tariffs between China and the United States have been steadily climbing. Last October Tesla stated that tariffs made by China to counter the U.S.’s tariffs “resulted in an import tariff rate of 40% on Tesla vehicles versus 15% for other imported cars in China.” [2]
To escape the high tariffs, Tesla has decided to just build the cars in whatever continent the customers are at, thus saving on tariff expenses.
Shanghai Giga output is just for greater China, not North America. Affordable cars must be made on same continent as customers.
— Elon Musk (@elonmusk) January 7, 2019
In December China had temporarily halted its additional 25 percent tariff on vehicles made in the United States, bringing its tariff costs down to 15%. This “tariff truce” will end on March 1 unless the two countries make another trade agreement [3].
Notes:
- ^“Elon Musk in China to Break Ground for First Tesla Factory Outside U.S.” Bloomberg.com, 7 Jan. 2019, www.bloomberg.com/news/articles/2019-01-07/elon-musk-in-china-to-break-ground-for-tesla-s-china-factory. (go back ↩)
- ^“tsla-ex991_6.htm.” 2 Oct. 2018, www.sec.gov/Archives/edgar/data/1318605/000156459018023815/tsla-ex991_6.htm. (go back ↩)
- ^Reid, David. “China says it will suspend additional tariff on US autos.” CNBC, 14 Dec. 2018, www.cnbc.com/2018/12/14/china-says-it-will-suspend-its-25-percent-additional-tariff-on-us-autos.html. (go back ↩)
