Tesla woes continue with China tariffs set to hit car maker hardest

China is Tesla’s biggest single market after the US, and an additional tariff threatens to give local manufacturers further pricing edge

A Tesla Model 3 in a showroom in Los Angeles, California. The company will be hit by Chinese tariffs. Lucy Nicholson/Reuters

Tesla needs to brace for another setback after China included electric cars among American products that it’s targeting with additional tariffs in its counter-punch to the US.

While other autos imported from the US were also on the list, including most types of 4x4s, Tesla is at a particular risk because it relies on American-made vehicles for all its Chinese sales. Other US car makers such as General Motors and Ford manufacture in China.

China’s announcement adds to a tough past few weeks for chief executive Elon Musk and Tesla investors, with a string of bad news hurting the company’s shares. China is the car maker’s biggest single market after the US, according to data compiled by Bloomberg, and an additional tariff threatens to give local manufacturers further pricing edge.

“The jump in tax levy hurts Tesla the most as it had not yet started local production in China," said Cui Dongshu, the secretary general of China’s Passenger Car Association. “For GM and Ford, they can always make up with China-produced ones."

A Tesla spokeswoman based in Beijing wasn’t immediately available to comment.

Tesla has been working with Shanghai’s government since last year to explore assembling cars in China, but has yet to clinch a deal. An agreement hasn’t been finalized because the two sides disagree on the ownership structure for a proposed factory, people with direct knowledge of the situation said in February.

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The US car maker is already hindered by China’s current 25 per cent import tax that catapults the sticker price beyond the means of most consumers. An additional duty would further relegate Tesla into a niche marque only afforded by the most wealthy.

Tesla sold 14,883 vehicles in China last year, accounting for just 3 per cent of the nation’s battery-powered electric-vehicle sales and placing it as the No 10 brand in that segment. China accounted for 17 per cent of Tesla’s revenue for 2017, according to data compiled by Bloomberg.

In the first two months of this year, 36,000 vehicles were imported from US, including Teslas, Lincolns and Mustangs, according to China’s PCA. European car makers such as Daimler and BMW also sell American made cars in China, according to Mr Cui.

In February, China imported 2,323 vehicles with electric motors from the US, and 2,160 of those were Teslas.