Tesla is considering bringing electric vehicles manufactured in China into the United States.
It will also establish a pipeline for shipments to Canada, while at the same time increasing its cost advantage at its Shanghai factory.
According to Reuters and two sources familiar with the company’s plans, Tesla is considering shifting its focus from the United States to exporting electric vehicles made in China. This shift would be in response to the automaker’s growing cost advantage at its Shanghai plant and the slackening demand from Chinese consumers.
People familiar with the situation said Tesla has been investigating whether components built by its Chinese suppliers are in compliance with local standards in North America, and if they are, the automaker may ship China-made Model Y and Model 3 vehicles for sale there as early as next year.
One of the participants mentioned how that would pave the way for shipments to Canada.
Musk responded to the news on Twitter with a simple “False,” and Tesla did not immediately react to a request for comment.
After an update earlier this year, Tesla’s Shanghai Gigafactory now has the ability to build 1.1 million electric vehicles annually, making it Tesla’s most productive manufacturing hub.
Producing Model 3 sedans and Model Y crossovers, the Shanghai facility supplies the domestic Chinese market and exports to the European Union, Australia, and Southeast Asia.
Inventory levels increased by the biggest margin ever in October, according to statistics from brokerage CMBI, despite the fact that Tesla had previously sold or shipped for export every vehicle it could build in Shanghai.
Furthermore, the sources familiar with the plans said that the cheaper yuan versus the US currency, lower raw material prices in China, and the growth in Tesla and new-car prices in the United States had all conspired to make exports from China to the United States potentially cost competitive.
If the idea goes into effect, it might make things more complicated for consumers in the United States. A new electric car subsidy and production incentive scheme was signed into law by US President Joe Biden, although the amount of incentive available to any one vehicle may vary based on whether or not it was imported.
Additionally, it may cause political tension. The Inflation Reduction Act (IRA) passed during the Biden administration provides rebates of up to $7,500 on the purchase of electric vehicles (EVs) as part of a law meant to force automakers to reduce their reliance on China.
Last month, Tesla’s CFO Zachary Kirkhorn told investors that the manufacturer was “extremely well-positioned to collect a big part” of the incentives available under the IRA for EVs and batteries for energy storage.
Tesla’s objective up until now has been to manufacture all of the vehicles it sells in North America at its facilities in Fremont, California, and Austin, Texas.
Tesla’s first factory was built in California, and it currently manufactures the Model S, Model 3, and the crossovers Model X and Model Y. The Model Y is manufactured at the recently established factory in Texas, and the forthcoming Tesla Cybertruck will also be built there.
Also, production at Tesla’s new plant in Berlin, which started earlier this year, is being cranked up to full speed. One of the sources claimed that the Berlin factory’s output will lessen the demand for exports from China.
But the price difference between Teslas sold in China and the US has been growing as a result of both increased US prices and additional discounts in China.
With CMBI analysts predicting a “pricing war” in China, Tesla cut the base prices of the Model 3 and Model Y by as much as 9 percent in that country just last month.
On Monday, the company announced a new discount for customers who take delivery this month and purchase insurance from a Tesla-affiliated company.
While the Model Y retails in the United States for $65,990, Tesla sells it in China for the equivalent of $49.344. The United States imposes a 25% tariff on vehicles made in China and a 27.5% levy on light-duty trucks.
China is the largest auto market in the world, yet they tax imported cars at 15%.
Elon Musk, before Tesla’s Shanghai facility began operations in 2019, pushed then-President Donald Trump to increase tariffs on automobiles imported into the United States from China in order to reach “a fair solution” in which both sides had “equally moderate” taxes.
Even if Tesla did import Chinese-made automobiles, they wouldn’t be the first American carmaker to do so. General Motors tried to get around the Trump administration’s 25% duty on imported SUVs by requesting an exception for the Buick Envision, but was denied.
The exchange rate for the Chinese yuan renminbi is currently $1 for 7.2511.
