Tesla and Ford, Brace for 40% Tariff From China - Ford Inside News Community
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Tesla and Ford, Brace for 40% Tariff From China

Auto Makers in the U.S., Including Tesla and Ford, Brace for Additional Tariff From China
Beijing is set to impose an extra 25% tariff on American auto imports this week
By Trefor Moss | Wall Street Journal
July 1, 2018 5:00 a.m. ET

SHANGHAI—China fulfilled a pledge to slash tariffs on imported cars Sunday, but the respite for auto makers who export to China from the U.S. will be brief as Beijing prepares to slap an additional 25% tariff on U.S. auto imports this Friday.

Car companies that import vehicles made in Europe or Japan, such as Porsche AG and Lexus, still stand to gain from the original tariff cut. But those that import vehicles from the U.S. now face a 40% tariff, rather than the 15% rate they had briefly expected.

A BMW spokesman said the company built over 371,000 vehicles at its Spartanburg, S.C., plant last year, of which 70% were exported. A quarter of the SUVs exported from the plant went to China, more than any other market, he said.

“Barrier-free access to markets is therefore a key factor not only for our business model, but also for growth, welfare and employment throughout the global economy,” he said.

Audi AG NSU -1.09% , BMW’s rival in the premium segment, only exports cars built in Europe, so it can still capitalize on the lower tariff rate. Cars built in Europe only account for around a tenth of Audi’s sales in China—compared with over 30% for both BMW and Daimler—and company executives say they aim to grow sales significantly.

Ford sold nearly 65,000 Lincoln vehicles exported to China last year, as well as nearly 19,000 Fords. It has plans to start building Lincoln cars locally from 2019, but until then its sales are likely to be dented. Lincoln had been a rare bright spot for Ford in China, with Ford’s sales falling 22% here in the first five months of this year.

Janet Lewis, Macquarie Capital Research’s managing director of equity research, said she expects Lincoln sales could suffer more than rivals “as its brand value is lower than the German premium brands.”

Importers of U.S.-built cars, including Tesla, had promised price cuts which are now likely to be reversed. The price of a Tesla Model S in China was set to fall from around $114,400 to $107,100. Instead, it will now increase to roughly $125,300, assuming Tesla passes on the whole tariff increase to its customers.

“Tesla customers are likely less price-sensitive due to the unique nature of the product,” Ms. Lewis said, though the higher tariffs could still translate into lower margins for the electric-car specialist, which last year booked over $2 billion in China sales.
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