As a consequence of the current trade war, Tesla faces an extra 25% on top of the standard 15% general import duty when importing into China from the USA. That is 25% more than imported German cars and more than 50% over locally produced vehicles that are eligible for EV incentives.
Tesla is speeding up the building of its Shanghai Gigafactory (GF3) to make a local Model 3, but that plant will not alleviate barriers to Model S & X imports.
Just like China, the European Union has a 25% import duty on cars from the USA. Tesla avoids this duty by producing the cars locally in its assembly plant in Tilburg, Netherlands. Originally, this was a simple reassembly of knock-down kits from Fremont. But over the years, it has evolved into a more normal assembly. At the moment, the plant is being extended, probably to build a local Model 3.
What Tesla needs is a comparable solution for China as it has for the EU tariffs. Preferably, that would be production within China, but it needs to at least be outside the USA. Could it be possible for Tesla to export the Models S & Model X from Tilburg, Netherlands? That would add some extra logistics costs but remove the 25% extra import duty, if the Chinese are willing to accept those Teslas as European cars instead of American cars.
I discussed this way of evading the China tariffs with some people a lot more knowledgeable than me. They thought that the Chinese ruling for this case was hard to predict. To get the Chinese to accept the cars assembled in Tilburg as Dutch exports would require some smart negotiations, which could very well be underway while you read this.
This should be a temporary solution, since the real solution is building an assembly plant beside GF3, where Model S & Model X can be assembled.
Local production that is more than reassembling a knock-down kit creates some new possibilities. Now that Tesla is becoming a larger carmaker, it should be looking into localized versions of its models. For cars in the price class of the S & X, the Chinese like long versions, putting more distance between the occupants and the chauffeur. For Europe, a hatchback/shooting brake version with more range for the Autobahn would be welcome.
There is still a lot of market to be conquered with the Model S & Model X, and Tesla should start with it sooner rather than later. Going all the way with this hypothetical solution in the Netherlands, when the temporary Dutch capacity for the Chinese S & X is no longer needed — after the Chinese assembly comes online — it would be perfect for localized European versions.
Photos by Kyle Field