A recent report has emerged suggesting that Tesla is looking to adjust the prices of its electric vehicles in China, in what appears to be a reaction to the increasing trade tensions between the United States and the Asian economic superpower. The price adjustments will take effect this September, according to two people familiar with the matter.
The information was related to Reuters, which published the report on Wednesday. According to the publication’s sources, Tesla’s upcoming price increase comes amidst uncertainties surrounding China’s currency, the Yuan, which weakened past the 7-per-dollar level on Monday for the first time in over ten years.
The weakening of the Yuan was met with opposition by the United States government, which accused China of being a currency manipulator. China, for its part, denied the US’ claims, stating that it has not used and will not use the Yuan to cope with the ongoing trade tensions between the two countries.
Nevertheless, the sharp drop in the Yuan came just days after US President Donald Trump stated that he would be imposing 10% tariffs on $300 billion of Chinese imports from September 1, 2019. Trump’s announcement promptly broke what was largely considered as a truce between the two countries’ trade war, which has disrupted global supply chains and stifled growth across several industries.
Until Tesla’s Gigafactory 3 in Shanghai starts its operations, all vehicles that the electric car maker sells in China will be imported from the United States. Tesla’s imports to China are bound to decrease with Gigafactory 3’s activation, though Elon Musk has noted that the higher-end variants of the Model 3, as well as the flagship Model S and Model X, will still be imported from the US even with the Shanghai-based facility in operation.
Gigafactory 3 is poised to be a vital part of Tesla’s strategy in China. The Asian economic superpower has adopted an aggressive plan to transition its auto industry to electric, and the country is currently the world’s largest market for EVs. With Gigafactory 3 producing affordable versions of the Model 3 and Model Y, Tesla could have a chance at breaking into China’s growing electric car segment.
China, for its part, has shown considerable favor towards the electric car maker. Apart from assisting Tesla in acquiring low-interest loans for the first phases of Gigafactory 3’s construction, the Chinese government has provided other ways to show its support for the electric car maker. Just recently, for example, the Chinese government formally announced that it will be expanding Shanghai’s Free Trade Zone to include the Lingang area, which just happens to be the site where Gigafactory 3 is located.