Tesla to raise prices in China earlier than planned

Tesla will raise vehicle prices in China this week, due to losses caused by the trade war. (Reuters pic)

SHANGHAI: Tesla Inc. will raise vehicle prices in China this week, two people familiar with the matter said, a reaction to the trade war that weighs on the country’s currency and threatens to once again lead to higher import tariffs.

Price hikes that were originally planned for September will now take place this Friday, a sales representative and another Tesla employee said, asking not to be named as the increase hasn’t been announced. A spokesperson for the US-based electric-car maker declined to comment.

Tesla is among automakers most affected by the US-China trade tensions because it has no local production yet and therefore gets directly hit by any increases in tariffs. China threatened last week to increase duties on US-made cars to as high as 50% in retaliation for President Donald Trump’s latest planned levies on Chinese goods.

A decline in the yuan, meanwhile, reduces the value of any earnings that Tesla brings back from China and converts to dollars. The Chinese currency fell to an 11-year low against the dollar on Monday.

Tesla is constructing a plant in China, an increasingly important market for the loss-making company as incentives for electric vehicles in the US wane. Tesla plans to start producing cars at the factory near Shanghai, Tesla’s first outside of the US, by the end of 2019.

Currently, the company imports its Model S, Model X and Model 3 vehicles into China from the US In a key step toward starting local production, Tesla agreed to buy batteries from South Korea’s LG Chem Ltd. to be used in the vehicles produced at the new China plant, people familiar with the matter have said.

While Tesla has a strong following in China, local rivals have a head start thanks to significant support for the sector from Beijing. Imported vehicles are made costlier by tariffs, while locally built EVs enjoy government incentives.