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Tesla Scrambles To Hike Prices In China, Blames Yuan Weakness

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Tesla plans on once again raising prices in China – marking yet another shift in pricing strategy overseas. Changes to pricing overseas (in the case of earlier this year, a barrage of price cuts as demand waned) have occurred so often and without rhyme or reason that they even spurred protests from Chinese consumers earlier this year. In early August, we reported that Tesla had changed its mind and was looking to raise prices on Chinese consumers as a result of what it called “Yuan-related uncertainty”. 

Now, those price hikes look as thought they are set to happen far quicker than originally anticipated, according to Bloomberg. Tesla is expected to hike prices in China as soon as August 30, in response to the trade war escalation of the past week. The hikes had been originally planned for September. 

The bigger question is how long after the price hike will Tesla announce yet another price cut as it sees demand for its product go up in smoke… a different kind of smoke from that generated by its spontaneously combusting solar panels.

Last week saw a significant escalation in the trade war when China threatened to increase tariffs on U.S. made cars to as much as 50% in response to President Trump’s latest round of tariffs on Chinese goods. And as trade war escalated, the Yuan has tumbled, reducing the value of any earnings that Tesla brings back from China and then converts to U.S. dollars. On Monday, the Yuan fell to 11 year lows against the dollar. 

Tesla imports all of the cars that it sells in China, but is currently in the process of building a factory in Shanghai that aims to help the company minimize the impact of the ongoing trade war and associated tariffs (even though it has bizarrely been slashing capex guidancein advance of this massive money pit).

As of now, the company imports its Model S, Model X and Model 3 vehicles into China from the U.S. Tesla has agreed to buy batteries from South Korea’s LG Chem Ltd. for when it begins production at its new China plant. 

While Teslas still remain popular in China, local brands have a head start on the company and can also ride the tailwind of government incentives, while Tesla must face the headwind of import tariffs. 

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