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China Grants Tesla Surprising Tariff Exceptions

The ongoing trade war between the U.S. and China is not looking like it will ease up anytime soon, but there has been a little bit of light at the end of the tunnel, at least for Tesla.  Today China announced that it will allow for broad tax exclusions for electric vehicles, including Tesla Model 3, Model S, and Model X.  By making Tesla exempt from tariffs in China, the electric car manufacturer can avoid import taxes which could have crippled its efforts at expanding into the Chinese market.

Tesla Exempt from Tariffs in China

According to the Chinese Ministry of Industry and Information Technology (MIIT), Tesla will be provided an exemption from the tariffs that will be resumed come December.  This will allow the company to avoid increased costs resulting from the trade war and allow them to continue to reach to the world’s largest market for green vehicles. 

The Chinese market is extremely important to Tesla.  Consultancy firm LMC Automotive estimates that Tesla sold about 23,678 vehicles in China during the first seven months of 2019, which is double the number that was sold there last year.  According to a post made on Tesla’s WeChat, a Chinese social media platform, an exemption from just a 10 percent purchase tax could reduce the cost of a Tesla vehicle in China by about 99,000 yuan ($13,957.82).

While no direct reason has been given why China has provided tariff exemptions to Tesla, it may have something to do with the fact that the electric car manufacturer is currently expandinToday China announced that it will allow for broad tax exemptions for electric vehicles, including Tesla Model 3, Model S, and Model X. g into China.  The Gigafactory 3 is rumored to be getting off the ground very soon, and Tesla is prepping for a major Chinese sales push. 

“It is pretty clear Tesla is committed to China, with the investment in the Shanghai Gigafactory. Those relationships probably helped Tesla lobby for a successful exemption from the tax,” Roth Capital analyst Craig Irwin stated.

Trade War

Thanks to tensions between the world’s two largest economies, both the U.S. and China have been trying to one-up each other by retaliating via tariffs or import restrictions since March of 2018.  Thanks to their bickering, consumers have been faced with higher prices, other countries have found themselves with economic damage, and the stability of the stock market has been shaken. 

Last week China revealed that it will continue auto tariffs that it had originally paused back in April.  Starting in December, China will once again put a 25 percent tariff on imported U.S. automobiles, as well as a 5 percent tariff on all U.S. auto parts and components.

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