Tesla is finally extending its horizon towards Asia. This after the car company registered a financial leasing company in China. According to Electrek, it is deemed to be a latest sign the U.S. electric car maker attempts to speed up its push into the country.
The California-based carmaker, which is led by eccentric billionaire Chief Executive Elon Musk, has opened a wholly owned financial leasing unit in Shanghai’s free trade zone. It even comes with registered capital of $30 million.
As far as the official documents are concerned, the aforementioned filing has a scope that already includes both leasing and consultancy. At the same time, it lists the firm’s legal representative as Zhu Xiaotong, who is expected to the boss in China’s Tesla. As of press time, the company declined to give out further comments.
The car company has opened a tender process in order to build its Shanghai Gigafactory. Also, it decided to include at least one contractor and it has already started buying materials.
The $2 billion factory, which is Tesla’s first in China, marks a major bet by the U.S. electric vehicle (EV) maker. It is safe to say that the company is looking bolster its presence in the world’s biggest auto market, especially since it is where it faces rising competition from a swathe of domestic EV makers. More importantly, it is the same competition that allowed its earnings to be hit by increased tariffs on U.S. imports.
The move comes after Tesla had a few complicated months in the country. It is worth noting that these cutbacks were all due to the trade war Trump’s administration launched against China.
Back in May, Musk’s company decided to lower its price by around by 40,000 yuan to 90,000 yuan ($6,000 to $14,000 USD), though it largely depends on the model in the said Asian country. The automaker was doing it in preparation for a planned reduction of the 25% import duties that its vehicles are subject to in the country down to 15%.
Unfortunately for Tesla, the decision to do so only backfired as the trade war began to escalate. And as soon as July entered, the company was forced to increase the price of both Model S and Model X by over $20,000 in the country, a decision largley due to new trade-war tariffs.
Eventually, the car automaker was subject to up to 40% in import duties for the cars it delivers in the country from California. Last month, it was successful in reducing the prices of its vehicles in the country, which was by 12 to 26%. But as far as the company is concerned, it was only due to the move to absorb the difference this time.
Still, Tesla’s timing was good since Trump said that China agreed to lower tariffs on all U.S. cars last. While they are not permanently lowering the tariffs, the country confirmed that it would “suspend the additional tariffs on US vehicles and auto parts for three months starting January 1, 2019.” It means that the tariffs should, at least temporarily, go back down to 25% for the first quarter the said year.
Even though Tesla had already reduced the price of the above-mentioned models before the announcement, it still adjusted the price again to reflect the change. This weekend, it has also adjusted the price of Model 3 in China to now start at 499,000 yuan ($72,000).
Despite the reprieve, Tesla still finds itself at a cost disadvantage with other companies in the market and it is now trying to maintain demand until local manufacturing fixes the cost disadvantage.