Tesla raises vehicle prices by 20 percent in China due to US trade war tariffs

By Polycount ยท 21 replies
Jul 9, 2018
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  1. The US and China have been locked in a bitter trade war for several months now. In April, the US banned suppliers from selling parts to Chinese smartphone giant ZTE. Additionally, US officials reportedly pressured the likes of AT&T and Verizon into dropping Huawei and ZTE phones from their device line-ups.

    As a result of all of these roadblocks, ZTE was forced to shut down their US-based operations temporarily. However, it isn't just Chinese companies that are feeling the effects of this trade war.

    Indeed, Tesla has been forced to raise the prices of their all-electric Model S Sedan and their Model X SUV by a whopping 20 percent to make up for recently-implemented US-China trade tariffs.

    20 percent may not seem like much at first, but due to the high cost of Tesla's vehicles, Chinese residents could easily be forced to pay anywhere from an additional $20,000 to $37,000 just to get their hands on one of the cars.

    While these tariffs haven't stopped Tesla from operating in China, it's only a matter of time before the country's wannabe Tesla owners become fed up with the high prices. That could be a pretty substantial blow to Tesla's business, given the fact that they ship quite a few cars to Asian markets.

    Only time will tell how Tesla decides to handle the situation moving forward, but it's possible they will be forced to accelerate their rumored plans to build local factories in China if the trade war doesn't end soon.

    Permalink to story.

     
  2. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 2,973   +1,279

    Tesla is already building a plant in China. This was announced last year because China already had very high import taxes on cars and Telsa didn't want to have to pay them. From the story linked below: a Tesla cost 50% more in China than in the US.

    http://fortune.com/2017/10/22/tesla-car-factory-shanghai-china/

    According to this article - Tesla will get a big discount once they start building the cars in China. I'd expect this new additional tariff would also get dropped once that plant is running.

    Bummer that companies have to build their products in China just so they can sell them there without getting screwed on taxes.
     
    Reehahs, cliffordcooley and Polycount like this.
  3. Theinsanegamer

    Theinsanegamer TS Evangelist Posts: 1,122   +1,144

    Or Musk needed more money to prop up his flailing business while he makes useless subs out of rocket parts to virtue signal.

    Tesla is still struggling with the whole "profit" idea.
     
  4. Jeff Re

    Jeff Re TS Booster Posts: 77   +41

    The ZTE issue has nothing to do with tariffs.
     
  5. gusticles41

    gusticles41 TS Guru Posts: 271   +268

    I bet you can put a negative spin on just about anything.
     
  6. Theinsanegamer

    Theinsanegamer TS Evangelist Posts: 1,122   +1,144

    Oh, I'm sure I could.

    But given these price increases come at a time where tesla is struggling financially and is on increasingly shaky ground is telling, and must spending his time making a useless sub (it wont fit in the caves, which anyone with two brain cells could point out to him) and promoting it on twitter as opposed to fixing his own company is also telling.
     
  7. Reachable

    Reachable TS Addict Posts: 231   +89

    So what exactly is going on. If Tesla (meaning, the people in the executive suite at Tesla, Inc.) is raising the prices it would mean that the increased price to them of Chinese components of their cars is behind the rise. That would be caused by the U.S. tariff on Chinese goods. If the price of Teslas simply went up in China because of the China tariff on U.S. goods, that's a different cause. Because products today often use components made in foreign countries, if there's a trade war going on the price of a product could be raised both by the tariff the purchasing country levies on goods from the manufacturing country and the tariff that the manufacturing company levies on goods from the purchasing country.

    Has anybody thought this out thoroughly? I doubt it. And if anyone has, it wouldn't be Trump, because he doesn't think anything out thoroughly.
     
  8. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 2,973   +1,279


    From what I read - sounds like it's this...

    1) China has a big tariff (from before Trump) on imported cars - not pieces of them, but the whole car.
    2) Tesla cars therefore cost way more in China because of this tariff and Tesla decides to build a factory over there to get around it.
    3) Trump gets elected and says 'China is ripping us off with these tariffs!' and puts tariffs on Chinese goods.
    4) China says 'Trump just started taxing our stuff! We're going to tax you back! And China adds more tariffs.
    5) Tesla cars now cost even more after China's new tariffs.

    (in the future)
    6) Tesla's plant opens and rich Chinese people can now buy a Model S for under $100,000 USD again.

    So - here's the question.. Should Trump just let China tax our imports into China without doing anything in return? Or should he tax their imports so we have more of a level playing field? Or maybe do something to level the field without new tariffs?
     
    Reehahs likes this.
  9. Polycount

    Polycount TS Guru Topic Starter Posts: 826   +187

    I don't know that Tesla will get a discount if they build a factory, but they won't have to deal with import/export costs. Just wanted to clarify.
     
  10. Bluescreendeath

    Bluescreendeath TS Booster Posts: 53   +37

    Yeh, many of the recent news articles seem to conveniently leave out the glaring fact that China already has extremely high tariffs - Chinese tariffs are significantly higher tariffs than US tariffs.

    Add in the fact that the Chinese government forces foreign companies to transfer technology to domestic companies and their government engages in corporate espionage (eg. hacking databases to steal intellectual property or stealing suitcases full of advanced GMO seeds), and it's pretty evident that any "trade war" was started by the Chinese a while ago.

    It's funny that China is now trying to play the victim card here and many media otulets are falling for the act hook, line, and sinker...and mainly because Trump is unlikable.
     
    Last edited: Jul 9, 2018
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  11. kapital98

    kapital98 TS Maniac Posts: 253   +192

    Free trade is always good. It is better for a country to have low/no tariffs on countries regardless of how high the other country's tariffs are. The concept of tariffis -- even in retaliation -- being good was disregarded with mercantilism 200+ years ago (It's a central thesis of Smith, Ricardo, and Marx). The only time to use tariiffs is if the other countries is attempting to comment antitrust violations (such as China being penalized for tire dumping about 5 years ago).

    Furthermore, I'm not sure where you're getting this "very high" tariffs from. China fought very hard and had to drastically cut down their tariffs to be part of the World Trade Organization. Their tariff levels are public documents and anyone can view them: http://stat.wto.org/TariffProfiles/CN_e.htm

    Now, tbf, China does have high import tariffs on some goods (such as coffee and sugar -- ~25%). However, their ~12% tariff on transport equipment and manufacturing tools is not incredibly high.

    Another way to look at it, they have very low tariffs compared to weak states in Africa and Latin America. But extremely high tariffs compared to the US or EU. Regardless, there is no legitimate reason -- and it only hurts American consumers -- to raise tariffs or create a trade war with China.
     
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  12. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 2,973   +1,279

    I don't know what the exact tariffs are for US cars in China. The Wall Street Journal said that a Tesla costs 50% more there because of them. They're definitely high enough for Tesla to build a plant there. Whether that's 'very high' or not is up to who you ask I guess.
     
  13. kapital98

    kapital98 TS Maniac Posts: 253   +192

    I'd be interested in seeing the WSJ piece. If it's news or part of their opinion section (their news section is legitimate and their opinion is just a screed).

    I'm assuming, if in the news section, they are taking the extra cost of each piece of capital and/or labor into account. For instance, the trade war will potentially increase both the cost of components (like inputs such as steel) as well as the final product. They are being screwed on both ends.

    Inversely, this is how American companies avoid taxes and are able to say "made in america". It just means they assembled foreign parts in the US. With rare exception, US countries have rarely had to worry about trade issues since passage of the GATT and later the formation of the WTO. The penalties for arbitrary tariffs are so high that it's not economically feasible to go against the WTO. Even when countries do it (such as George W. Bush's steel tariff) it almost always comes back with far greater penalties than any perceived value.
     
    Evernessince likes this.
  14. hahahanoobs

    hahahanoobs TS Evangelist Posts: 2,203   +742

    I think Trump just killed Harley Davidson and Tesla in less than a few weeks. Bravo, Orange man, bravo.
    All I can do is wait to see who else flees the US for overseas relief.
     
  15. cliffordcooley

    cliffordcooley TS Guardian Fighter Posts: 10,229   +4,155

    You know I have said this for years, we are getting screwed from lack of import taxes coming from China. There would be more things built in the US, if we had higher Import Taxes. Your statement if true proves it.
     
  16. Dimitrios

    Dimitrios TS Booster Posts: 100   +56

    Umm I'm a biker and know a lot of people that own or getting rid of Harley bikes. Why? Harley sales have been down for a few years most being their bikes are over priced and overrated and other brands sell for Thousands less and are actually better!!!!!!! Harley's owners are now in old folks homes or are dead. That generation is almost gone and I'm happy Harley is hurting. Over priced junk with nothing but issues. To me they are like APPLE if it explains it better for you. Don't use that Trump $hit on Harley.
     
  17. Evernessince

    Evernessince TS Evangelist Posts: 2,701   +1,808

    The President himself has directly threatened Harley for moving production offshore. Harley may have had slumping sales but this spat with Trump certainly isn't helping them. It's a good thing a president can't apply different rules to single companies.
     
  18. hahahanoobs

    hahahanoobs TS Evangelist Posts: 2,203   +742

    None of that makes any sense...
     
  19. Bluescreendeath

    Bluescreendeath TS Booster Posts: 53   +37

    First, free trade by definition is trade without artifical restrictions, quotas, and tarriffs. When countries have tarriffs, especially high tarrifs, then by definition it is NOT free trade.

    Second, China subsidizes their state corporations forces foreign companies to transfer technology, and separately engages in corporate espionage (hacking, stealing suitcase full of advanced GMO seeds, smuggling electronics, etc) to help their domestic industries. That is effectively building up their state monopolies with unfair competition, and should be no different to the anti-trust legislation is meant to address. Tariffs should be used to address this.

    Third, China has high tariffs in comparison to the US. You yourself pointed that out. Furthermore, that WTO article also leaves out : 1) state support of domestic industries - which is much more significant in China and allows them to dump extremely cheap subsidized products on the market and 2) regulatory hurdles and regulations that can serve as more effective barriers to trade. Tariffs only increase the monetary cost of consuming foreign goods, but China's government can and has shut down foreign imports/foreign companies in the past for political and economic agendas. Increased regulatory barriers that delay imports will cause shipping cargo containers packed with agricultural products to rot in the ships. Their government has fanned nationalism and state-promoted boycotts (eg. of South Korea grocery chains like Lotte, Japanese cars, etc) that can cripple foreign businesses in China.

    Finally, you're also missing the point of these tariffs. Tariffs aren't being practiced to maximize gold/silver/etc, and nobody is saying tariffs are good. For newly developing countries, they are a necessary evil. The fact that the WTO has accepted tariffs for the poorer countries shows that tariffs are not blanketly "disregarded" as you claim. South Korea was allowed tariffs for years when they were in poverty to protect their fledgling domestic industries. China has moved long past the poverty developing country stage and has been dragging their feet on reforms - they're currently stuck in the mercantile viewpoint.

    America's current tariffs are a form of MAD - the tariffs themselves are not the end goal. One of its primary purpose is to get the other party to lower their tariffs so everybody has less tariffs.

    So if you look at the bigger picture in terms of China's actions as a whole instead of only focusing on the issue of the "US-China trade deficit," then there are plenty of good reasons for these tariffs.
     
    MilwaukeeMike likes this.
  20. MilwaukeeMike

    MilwaukeeMike TS Evangelist Posts: 2,973   +1,279

    The first post I made above has a link to the story on Fortune.com about it, and inside there they linked the WSJ story and gave details from it. It's not an opinion.
    Here it is again.
    http://fortune.com/2017/10/22/tesla-car-factory-shanghai-china/

    It says Tesla will still have to pay a 25% tariff on imported parts, but they can get around that if they share/work with Chinese car companies. They don't go into detail what that exactly means though, or if Tesla will do it.
     
  21. kapital98

    kapital98 TS Maniac Posts: 253   +192

    You're advancing mercantilism. Ricardo's lasting legacy is his proof of comparative advantage and how trade, without restriction, is optimal regardless of the taxes of other countries. This was an extension of Smith's less refined argument. This research has been confirmed in modern economics as well.

    You can use buzzwords like "Missing the point" and incorrect definitions "free trade is by definition" but that's not going to make what you say true.

    Your recounting of WTO history is incorrect. The WTO is a modern version of the GATT. The GATT (and now the WTO) did not keep high tariffs and noncompetitive practices to help developing countries. They kept them in because it was the only way to get smaller countries to go from very high tariffs to lower tariffs. The US already had low tariffs and people were still upset about the few tariffs that had to go down. The only reason countries like China fight so hard to get into the WTO, and give up so much State autonomy, is because the economic benefits of stable, long-term free trade are very high.

    Developing countries do have a long history of attempting to manipulate markets --- largely with terrible results. There have been a few exceptions (Wade's "Governing the Market" is a modern econ classic). Yet these are rare and even Wade admits the rise of the WTO and the emergence of international capital movements makes his work mostly academic.

    Basically, who cares if China wants to manipulate their market? The US is not losing anything in an absolute sense by doing trade with a country with high imports. Either they want our goods or they don't. If it's profitable, we'll do business. If not, we won't. We will use substitutes. Meanwhile, the US raising tariffs to fight China does not produce any positive results. It artificially decreases consumption and employment in order for us to raise tax revenue. Such a blunt instrument does nothing to stop any deceptive practices China was doing prior to the tariff.

    A "free" market is another word for a competitive market. The tariffs may shift supply and demand schedules but they don't impact the general mechanisms of the market. Ie, it's not a 'failed' market in the same sense of healthcare or toxic emissions.
     
  22. Bluescreendeath

    Bluescreendeath TS Booster Posts: 53   +37

    You can keep accusing me of advancing mercantilism in an attempt to discredit my point, but that doesn't make it true. You can also keep vaguely citing historical figures and academic works without specifically applying it to the context of this situation. Simply vaguely citing works and authors in this manner doesn't really support your argument. And if you want to claim my textbook definition of free trade (trade with little to no restrictions/tariffs/quotas) is incorrect, then go ahead and provide your own definition for free trade. You're the one who brought up the term "free trade" in the first place to support your own argument.

    As I mentioned earlier, China heavily subsidizes their industry, manipulates domestic consumption, forces foreign companies to transfer technology to help domestic companies, and engages in outright economic espionage/IP and tech theft. They are building up monopolistic industries outside of market conditions that you yourself admitted that tariffs should be used to fight (anti-trust). You seem to be leaving out these crucial points.

    Keeping tariffs high for developing countries was a part of the incentive to get them to join the international trade organizations. The benefits of trade worked both ways and developed countries were willing to compromise and allow higher tariffs in exchange for access to new markets and labor.

    The US is using tariffs to advance a broader agenda to get China to comply with trade norms and push their economic reforms that they've been stalling for years. It's time for them to lower their own tariffs, stop forcing foreign companies to give up technology, and stop outright stealing American intellectual property and technology to subsidize their own industries. You keep focusing on an incredibly narrow part of trade dispute (profits and revenue) while missing the overall purpose of its effects of US-China relations.

    And no, the US is not simply raising tariffs to raise revenue as you claim. I'm not sure where you got that idea. The revenue raised from tariffs will be peanuts and will be probably less than the revenue lost by reduced trade. This is not about raising money. The tariffs are here mainly here to achieve an end as another bargaining tool in the context of larger political-economic policy - they are not an end in itself and not simply as a means of raising money.

    And finally, we are not dealing with a competative market here. China's government has repeatedly destroyed the ability of foreign businesses to operate in their country. They've engaged in many behaviors as mentioned above that are non-competative in nature and simply subsidizes their own state industries in order to position themselves to control the market as monopolies. Their behavior of outright IP theft is uncompetitive in nature. This doesn't even go into the issue that much of this tech theft goes into military hardware that is being used to militarily enforce their claims over 90% of the SCS. You keep talking as if China is just another typical Western country that plays by the same rules and whose only issue is higher than normal tariffs.
     
    Last edited: Jul 10, 2018

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