EsElectric vehicle manufacturer Tesla is close to completing the $145 million purchase of land needed for its new Chinese factory to be located in Shanghai, Bloomberg reports. The company plans to eventually produce as many as 500,000 vehicles there annually though the timing of the factory’s opening is far from clear.
There are both supply chain and economic reasons for the plant’s development. Localization of manufacturing based on global parts networks is a common strategy for global automakers. China accounted for 17.2% of Tesla’s revenues in 2017, S&P Global Market Intelligence, and 36.6% of its ex-Americas revenues.
The imposition of additional duties of 25% on U.S. electric vehicle sales by the Chinese government, as outlined in Panjiva research of July 9, provides a solid financial reason for the move. That reasoning could evaporate though if the duties – imposed in July in retaliation for U.S. duties – are subsequently reversed due to improved U.S.-China trade relations.
Tesla’s offshoring of production would have a noticeable impact on U.S. exports earnings in the long term. Panjiva data shows U.S. exports of electric vehicles to the U.S. by all manufacturers reached $1.53 billion in 2017, or 45.8% of the total.
The impact of China’s tariffs – which Tesla has tried to mitigate with price rises – can already be seen in the 76.1% sequential (and 77.9% annual) decline in shipments in the three months to August 31. Production has been partly diverted to Europe where imports from America surged 49.3% higher sequentially and 126.3% annually.
Source: Panjiva
