Tesla has started volume deliveries of Model 3 vehicles in China after the first ship arrived just over a week ago.
Those deliveries come just before an important import tariff increase that is likely to strongly affect Tesla’s demand in China.
Last year, Tesla started taking orders for Model 3 in China, but only for the more expensive Performance and Long-Range Dual Motor All-Wheel-Drive versions.
The Model 3 Performance started arriving in the country just a few weeks ago and Tesla already started taking orders for a cheaper version of the vehicle. Tesla had yet to launch the version of the vehicle in Europe.
The move appeared to aim at increasing short term demand for the vehicle in China and deliver more vehicles in March before the tariff changes in April.
Now Tesla announced the first official deliveries in China last week:
First Model 3 deliveries in China! pic.twitter.com/jhIsj3nzLv
— Tesla (@Tesla) February 22, 2019
Last week, Tesla also reported that its revenue from China dropped for the first time since it entered the market.
In order to reverse the situation, Tesla has a multiple part approach.
First off, the automaker is trying to take advantage of the tariff relief for the next month and deliver as many vehicles as possible.
The company has a few ships full of Model 3 vehicles trying to arrive in China in time to do just that.
Secondly, Tesla is starting construction on Gigafactory 3 in Shanghai and it expects production to start by the end of the year.
Vehicles coming out of Gigafactory 3 are not going to be subject to the import tariff, which is set to increase to 40% in April unless the trade war situation changes by then.
China is an important market for every automaker and Tesla is not the exception.
I think the situation is going to be rough for Tesla in the country for most of the years. I am sure they will be able to deliver a decent amount of vehicles in the coming weeks, but I feel like it will dry up for most of the year until something changes with the tariff or Tesla start production at Gigafactory 3 in time.
Both of those things come with massive question marks.
What do you think? Let us know in the comment section below.
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