Trade war sends Tesla to China
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Trade war sends Tesla to China

As the trade war between China and the U.S. has continued to heat up, electric carmaker Tesla has taken a hit: its vehicles have become shockingly more expensive in the east. That’s a big problem for the company, as China is the world’s biggest market for electric vehicles. However, CEO Elon Musk has a solution: open a factory in China, and sidestep tariffs altogether. On Tuesday, he took the first real step towards that goal, signing a deal to build in Shanghai.

graph 1207 tesla

According to a spokesperson for the company, construction will begin as soon as the approvals and permits are secured. The first vehicles will appear in around 2 years time, and it’ll take another 2 – 3 years for the plant to get up to its fully capacity (producing 500,000 vehicles annually).

There’s no pretending that this move isn’t a direct response to Mr. Trump’s trade war – but it plays in to Tesla’s wider strategy, which is to find a more efficient way to reach global markets and expand its capacity. Hence, Tesla first announced that it was in discussions about building cars in China a year ago. Other benefits to being in the country include reduced shipping costs and the possibility that sourcing components could be more economical.

Tesla’s share price has risen 4% in 5 days

graph 1207 tesla 2

SOURCE: Yahoo Finance

China is a huge growth opportunity for Tesla, as it is undoubtedly the world’s biggest market for electric vehicles. In 2018, the China Association of Automobile Manufacturers says that more than a million units may be sold. The government hopes to see 7 million electric cars sold every year by 2025.

In a statement, Tesla said: “Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here.”


Dominion holds Tesla in its Global Trends Luxury Fund.

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