A few weeks ago Elon Musk had tweeted at Donald Trump asking him to figure out the unfair relationship that US has with China when it comes to tariffs on imported goods. Tesla has to pay a 25% tariff to sell its cars in China while any Chinese company would only have to pay 2.5%, which is 10 times less, when importing its cars in the US. Musk had compared this to running a marathon in lead shoes.
Trump has been escalating the trade wars with China for a few weeks now and as China responds in kind Tesla may end up on the losing end after all. We don’t know if China is planning on putting a higher tariff on US made cars but this is something that would need to be resolved before Tesla can feel good about its future in China.
Any non-Chinese car maker that wants to make its cars in China to avoid the tariff has to partner up with a Chinese based company and own no more than 50% of the joint venture. Of course, no company wants to share its technology, secrets and profits with other companies but many are forced into moving forward with such arrangement in order to compete in Chinese market rather than completely be shut out of it.