Tesla could raise prices in China due to lower yuan ahead of Chinese-made Model 3 rollout

Tesla is currently considering raising prices in China due to the Chinese yuan falling, according to a new report.

The price change would come just ahead of Tesla rolling out its first Chinese-made Model 3 vehicles to avoid tariffs imposed on US imports.

The yuan fell to the critical level of 7 yuan to $1 USD — a first in over a decade. The value dropped after President Donald Trump surprised many by promising to impose new 10% tariffs on another $300 billion of Chinese imports starting next month.

According to a report from Reuters, it is pushing Tesla to have to increase its prices in China:

“U.S. electric vehicle maker Tesla Inc is considering lifting its prices in China from September amid yuan-related uncertainty, two people familiar with the matter said.”

Tesla currently imports all vehicles in China from the US and the vehicles are subject to important import tariffs.

With the tariffs on US vehicles and now the lower buying power due to the weakening yuan, Tesla’s vehicles are becoming increasingly expensive in the Chinese market, which is the biggest auto market in the world.

The automaker is currently trying to achieve lower prices in the country by making the lower-end versions of the Model 3 domestically at its Gigafactory 3 under construction in the Shanghai free-trade zone.

Tesla’s vehicles would still be subject to a 15% MFN tariff, but it would be much lower than the up to 40% tariffs that could apply to US vehicles in China.

Earlier this year, Tesla announced that its made-in-China Model 3 is going to start at the equivalent of ~$47,500 USD.

The company has been guiding deliveries by the end of the year.

Electrek’s Take

China is Tesla’s most important market outside of the US and any development in the market is heavily scrutinized.

If Tesla plays its cards right, its sales in China could soon surpass its sales in the US, but it has to get over a few hurdles.

Gigafactory 3 could get them over most of them in one clean sweep, but there have been a lot of doubts about Tesla bringing the factory to production on schedule.

I have my doubts too, but the most recent progress that we have seen is extremely encouraging.

I now feel confident that Tesla is going to at least produce low volume at Gigafactory Shanghai by the end of the year and reach some more significant levels of production (1,000 to 2,000 units per week) by mid-2020.

Let’s not undermine the significance of that. For the first time in 17 years of existence, Tesla will produce full cars at two different factories — one in each of its two most important markets.

I believe it should greatly stabilize the company.

What do you think? Let us know in the comment section below.