Chinese President Xi Jinping announced on Tuesday that the country will “significantly lower” import tariffs on vehicles, and Tesla CEO Elon Musk couldn’t be happier. The current policy sees foreign automakers facing 25 percent tariffs on imports and regulations bar companies from owning more than 50 percent of local manufacturing. The shift in policy is considered a big win for Tesla.
In pre-market trading, Tesla stock rose 2.7 percent after the announcement, continuing from last week’s record-setting rally that saw the biggest gains in four years. Musk hailed the move on his Twitter page as “a very important action by China,” as “avoiding a trade war will benefit all countries.” The reversal comes just under a week after China announced new tariffs on 106 American products aimed at targeting $50 billion worth of annual imports, a move that sent Tesla stock down by four percent.
It’s an issue Musk has raised before. Last month he contacted President Donald Trump on Twitter to ask about “equal and fair rules” for car imports, noting that a Chinese car coming to the United States pays just 2.5 percent in import tariffs, and there are five fully Chinese-owned electric car companies in the country. He described the current rules as “like competing in an Olympic race wearing lead shoes.”
Xi’s speech, made at the Boao Forum for Asia, signaled an intention to open up the economy, increase imports, and achieve a greater balance of international payments. The speech is a turnaround from the gradually increasing standoff between the two countries. After the United States imposed tariffs on solar panels, steel, and aluminum this year, China added 128 tariffs on American products in response and listed 106 extra tariffs last week.
Tesla has struggled with import tariffs for its China operations. Its plan to build a factory in the Shanghai Free Trade Zone stalled in February over whether it would still have to partner with a Chinese firm. Xi’s comments suggest Tesla’s China strategy could become a lot easier soon.
It’s a boost Tesla desperately needs — Chinese consumers currently have to pay over $130,000 to import a Tesla Model X, making it far less competitive compared to local brands like NIO.
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