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.
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
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.
If you would you like to receive the Newsfeeds daily, please click here to sign up now!Help us make this Newsfeed better by rating this article. 1 star = Poor and 5 stars = Excellent
- Click here to print this story: Print
The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.