China-made Tesla could be exported to the U.S.

Tesla did not immediately respond to a request for comment, but Musk in a Twitter post after the story’s release replied “False” without elaborating

November 14, 2022 11:10 am | Updated 01:45 pm IST - SHANGHAI

File photo of a Tesla car

File photo of a Tesla car | Photo Credit: Reuters

Tesla is considering exporting made-in-China electric cars to the United States, two people with knowledge of the planning told Reuters, in a reversal that would reflect the automaker’s deepening cost advantage at its Shanghai plant and slower demand from Chinese consumers.

(For insights on emerging themes at the intersection of technology, business and policy, subscribe to our tech newsletter Today’s Cache.)

Tesla has been studying whether parts made by its China-based suppliers are compliant with local regulations in North America. If they are, it could ship China-made Model Y and Model 3 cars for sale there as soon as next year, said the people, who declined to be named as the matter is private.

That could also open a channel for exports to Canada, one of the people said.

Tesla did not immediately respond to a request for comment, but Musk in a Twitter post after the story’s release replied “False” without elaborating.

Tesla’s Shanghai Gigafactory has the capacity to produce 1.1 million electric vehicles per year after an upgrade earlier this year, making it Tesla’s most productive manufacturing hub.

The Shanghai plant makes Model 3 sedans and Model Y crossovers to sell in China and for export to markets including Europe, Australia and South East Asia.

Until recently, Tesla had been selling or shipping for export every vehicle it could produce in Shanghai, but inventory levels rose by their largest margin ever in October, according to data from brokerage CMBI.

In addition, factors including a cheaper yuan against the U.S. dollar, lower raw material prices in China and the rise in Tesla and new-car prices in the United States have combined to make exports from China to the United States potentially cost competitive, the people with knowledge of the plans said.

The plan, if enacted, could create new complexity for U.S. buyers. Under the terms of a new electric-vehicle subsidy and production-incentive plan signed into law by U.S. President Joe Biden, the incentive available for an individual vehicle could vary depending on whether it was imported.

It could also be politically contentious. Tesla has been widely seen as one of major beneficiaries of the Biden administration’s Inflation Reduction Act (IRA), which offers rebates of up to $7,500 on EV purchases as part of a law intended to push automakers to reduce their reliance on China.

Tesla Chief Financial Officer Zachary Kirkhorn told investors last month that the automaker was “very well-positioned to capture a significant share” of the incentives offered under the IRA for EVs and batteries for energy storage.

Until now, Tesla’s strategy has been to build the cars it sells in North America at its plants in Fremont, California, and Austin, Texas.

The California plant, Tesla’s first, produces the Model S, the Model 3 sedans and the Model X and Model Y crossovers. The Texas plant, which opened earlier this year, makes the Model Y and will produce Tesla’s upcoming Cybertruck.

Tesla is also ramping up production at a plant it opened in Berlin earlier this year. Output from the Berlin plant will reduce the need for some exports from China, one of the sources said.

At the same time, the price gap between Tesla cars sold in China and the United States has been widening, reflecting both higher U.S. prices and new discounts in China.

In China, where CMBI analysts have warned of a coming “price war,” Tesla slashed the starter prices for Model 3 and Model Y in China by as much as 9% last month.

On Monday, it offered an additional rebate for buyers who take delivery this month and buy insurance from one of Tesla’s partners.

Tesla sells the Model Y for the equivalent of $49,344 in China, compared to the U.S. price of $65,990. China-made cars face a 27.5% U.S. tariff, while light-duty trucks face a 25% tariff.

China, the world’s largest auto market, imposes a 15% tariff on imported vehicles.

In 2018, before Tesla’s Shanghai plant was operating, Chief Executive Elon Musk had asked then-President Donald Trump to raise tariffs on cars imported to the United States from China in order to achieve “a fair outcome” where both sides had equivalent and “equally moderate” tariffs.

Tesla would not be the first U.S. automaker to ship made-in-China vehicles to the United States. General Motors has imported the Buick Envision SUV and unsuccessfully petitioned for an exemption to 25% U.S. tariffs imposed by the Trump administration.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.