Tesla Is Sending Boatloads of Model 3s to China Before Trump’s Trade War Truce Collapses
Could this be the breakthrough Tesla needs to beat extremely high prices on its most popular model in China?
Tesla has formulated a proactive plan that will allow Chinese customers to purchase the EV maker's Model 3 sedan, alas at an affordable price—and it includes shipping them in bulk across the ocean with hopes of a long-awaited Trump trade war conclusion.
A report by Bloomberg explains that Tesla chief executive Elon Musk & Co. have loaded at least three ships that measure the length of approximately two football fields with Model 3s. This cargo will supposedly make landfall near February's end, which is when President Donald Trump is expected to strike a deal with Chinese President Xi Jinping, putting at least a temporary stop to increasingly high tariffs affecting the two countries. China has agreed to suspend a planned tax increase of 25 percent through the end of March; this allows Tesla a brief window to move its product into the country while the "gettin's good."
“Our car is just very expensive going into China. The demand for Model 3 is insanely high. The inhibitor is affordability," Musk explained during the company's January earnings call. "It's just like people literally don't have the money to buy the car. It's got nothing to do with desire. They just don't have enough money in their bank account. If the car can be made more affordable, the demand is extraordinary."
While other automakers such as BMW have ways to skirt these mountainous taxes like simply building more cars in China, Tesla is yet to achieve production at its multi-billion-dollar Gigafactory 3. As a result, the Californian automaker must play it smart when it comes to exporting its fan-favorite four-door.
“They’re uniquely exposed,” said Robin Zhu, an analyst at Sanford C. Bernstein, to Bloomberg.
There's also another issue regarding affordability and Teslas in China: imported cars aren't eligible for local tax credits. In the United States, federal and state credits have been a major part of Tesla's business plan, up until now. The manufacturer must now figure out how to approach this conundrum abroad in order to tap into the prospectively booming Chinese market.
"It's pretty crazy because there's so many companies that—countries that have put price caps on the EV incentive, which differentially affects Tesla," Musk said during the same earnings call. "And in China, which is the biggest market for EVs, we've never had any subsidies or tax incentives for vehicles. So it's difficult."
In the meantime, semi-trucks have been lining up at San Francisco's Pier 80 with a multitude of Model 3s in tow. These cars have since undertaken a transcontinental journey which could be the start to Tesla's profit-fueled boon in the People's Republic.