Tesla commits to 500,000-car factory in China as tarrifs kick in

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It's the latest major company to feel the impact of the trade war between the world's top two economies.

These prices are more than 70 percent higher than in the United States where the basic Model S sedan sells for $74,500. China accounted for 17 percent of Tesla's 2017 revenue, according a filing with US regulators.

Tesla and Shanghai authorities did not immediately respond to requests for comment.

The company had only just cut its prices in China in May after Beijing announced it was slashing tariffs on auto imports from 25% to 15%.

Citing Tesla's lower than expected Q2 delivery numbers and higher costs, Brinkman lowered Tesla's EPS forecasts saying he now expects a Q2 loss per share of $2.80, compared with his previous estimate for a $2.45 loss per share.

The Tesla logo is seen at the entrance to Tesla Motors' new showroom in Manhattan's Meatpacking District in New York City, U.S., December 14, 2017. Sales in the country accounted for about 17 percent of its revenue past year.

Analysts were divided on whether the price hikes will bother affluent buyers in China where, in big cities like Shanghai and Shenze, it is considered a status symbol to own a Tesla. "This will certainly not be good for consumers or for Tesla's sales in China", said Bill Russo, founder of Shanghai-based consultancy Automobility.

Tesla shares rose 1.5 percent in US trading even as some analysts questioned where the money-losing company will get the capital required to build and staff such a large plant. Russo said NIO's new ES8 SUV has been positioned as a "Tesla-fighter".

After the latest tariffs that the USA slapped on China and the Chinese retaliatory tariffs last week, Tesla raised over the weekend the prices of its Model S and Model X on the Chinese market by between US$22,700 and US$38,000 (150,000 yuan to 250,000 yuan), depending on the version, Electrek reported earlier this week.

BMW exported about 81,000 cars from a plant in SC to China a year ago, generating about $2.4 billion in sales.

Capacity at BMW Brilliance Automotive's (BBA) two production sites will outstrip BMW's US plant in Spartanburg, South Carolina, for the first time. In addition to avoiding China's import duties on US-made cars, a plant in China also will reduce shipping costs and potentially make sourcing components more economical. "We are now calculating related necessary pricing increases", the company said in a statement. Electrek also says stores will get Performance Model 3 vehicles by the end of the month.

Tesla makes most of its cars in California, although it does some final assembly of cars in a much smaller plant in the Netherlands. Musk signed what was called a "cooperative agreement" with the Shanghai Municipal People's Government to jointly work on building the plant, which a Tesla spokesperson called "Gigafactory 3". While Musk, 47, said more than two years ago that he expected Tesla would produce that many vehicles a year from its lone auto plant in California by 2018, the company is well off that pace because of slower-than-expected output of the Model 3 sedan. If Tesla did not have room in its Fremont plant to build capacity for 5,000 cars a week, how will it manage 10,000, the analyst asked.

Adding to the stock's nosedive was a Business Insider (BI) report that said Tesla CEO Elon Musk ordered his engineers to stop putting almost finished Model 3 cars through a "brake and roll" test before leaving the company's factory in Fremont, California.

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