Elon Musk Is In China This Week As New Tariffs Begin To Bite

July 10, 20186 years ago Steve Hanley 0 Comments

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Tesla CEO Elon Musk is in Shanghai this week, where he finalized a deal for Tesla’s 3rd Gigafactory today. The new factory will be able to churn out an estimated 500,000 vehicles per year when it is fully built, which will be in an estimated two years. The finalized deal is the culmination of a long-term effort by Tesla to establish a foothold in the lucrative Chinese plug-in vehicle market, where more than half of the world’s plug-in vehicles are currently sold. Tesla currently has a small foothold in the Chinese market, selling 14,779 vehicles in the country last year. Establishing a local production facility would allow Tesla to avoid the newly enacted import tariffs from the US that came into effect last week.

China Shanghai government with @elonmusk $TSLA signed a pure electric vehicle project investment agreement 7/10/2018 pic.twitter.com/5hbsEvSTHI

— vincentyu.eth (@vincent13031925) July 10, 2018

Get ready for China 🇨🇳 Shanghai Giga, Target to produce 500,000 cars a year $TSLA pic.twitter.com/p96gmHPvvq

— vincentyu.eth (@vincent13031925) July 10, 2018

The price of a top-of-the-line Tesla Model X in China is $30,000 higher this week than it was last week. For the past several years, every Tesla sold in that country was subject to a 25% import tariff. Then, in June, China lowered the tariff to 15% and Tesla lowered its prices accordingly. But that was before the Mouth That Roared on Pennsylvania Avenue decided to prove that trade wars are easy to win and slapped new tariffs on $32 billion worth of Chinese made goods. (Note: This tariff actually played into our US Tesla sales estimates.)

Not surprisingly (to everyone not named Donald Trump), China immediately retaliated by imposing new tariffs on $32 billion worth of American made goods, including automobiles. The duty on cars, which had been 15%, rose last Friday to 40%, hence the increase in the cost of a new Model X.

China is the world’s largest new car market. China wants more electric cars. Tesla builds electric cars and is anxious to begin building a car/battery factory in China. But will the Trumpenator’s temper tantrums throw a monkey wrench into those plans? A protester in the UK last week compared Trump to a spoiled child who likes to throw his toys out of the pram. Actually, his normal behavior (and that of his base) is more like a two year old with a full diaper.

Bloomberg reports that Musk will be present at a trade event in Shanghai on July 10 before flying to Beijing later in the week to meet with Chinese leaders. Bloomberg has reached out to Tesla to confirm that information, which it got from anonymous sources, but people at Tesla have declined to respond as of yet, no doubt to avoid doing or saying anything that might upset what surely will be delicate negotiations.

Last week, Trump blasted the leaders of Harley Davidson for saying they are considering moving some production to other countries because of Trump’s trade tirade. Trump suggested his administration is working to bring other motorcycle manufacturers to the US — a deliberate slap in the face to Harley Davidson. Why the Jackass In Chief would pick a fight with a company whose customers practically define his so-called base is a great mystery.

China trade tariff on Tesla — Credit: Bloomberg

Musk has said any Chinese factory would build Model 3 sedans and the upcoming Model Y crossover SUV the company plans to bring to market in about 2 year’s time. It has no plans at the moment to build the Model S or Model X in China, but that could change if the trade war with China turns into a full blown pissing contest that goes on for a significant period of time. Trumps’ modus operandi is to begin any discussion with a slap upside the head of his adversary with a 2X4 so he can later back away and pretend he is being rational and reasonable.

But he forgets the Chinese have been skilled at the art of warfare and negotiation far longer than he and his family have been hate-filled racist stooges. He may be right that a trade war is easy to win. What he apparently doesn’t understand is that bluster and bombast are poor negotiating tools and there are no guarantees it is America who will benefit most from this latest round of international foot stomping.

The US has legitimate grievances with China when it comes to trade — grievances that adults like Elon Musk are capable of dealing with. By the time this all shakes out, there could be a groundswell of public approval for a Constitutional amendment that would make Elon eligible to serve as president of the US. Given the choices available today, there’s a good chance he could win any election by a wide margin.