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Tesla hikes prices in China as trade war hits carmakers

Reuters  |  SHANGHAI 

(Reuters) - U.S. carmaker Inc has hiked prices on its Model X and S cars by about 20 percent in China, becoming the first automaker to raise prices in the world's largest automotive market in response to a U.S.-trade war.

The move is also the first indication of how much higher Chinese tariffs on certain U.S. imports will flow through to showroom floors, with other automakers likely to follow suit or shift a greater portion of production to

The tariffs will dent margins at and other automakers who make cars in the and ship to China, as they have been increasingly betting on the world's largest automotive market to boost profits.

"Raising the prices is going to hurt sales, but money-losing has to raise prices because they can't afford to fully absorb the higher costs of the tariffs," said.

"Considering they claim to be capacity-constrained, they should be able to shift sales elsewhere."

For Tesla especially, rapidly burning cash and struggling to turn a profit, is key. Sales in the country accounted for about 17 percent of its revenue last year.

In May it slashed up to $14,000 off its Model X in China after announced major tariff cuts for imported automobiles, but the new tariffs have now erased that.

A basic Model S sedan now costs about 849,900 yuan ($128,779) up from 710,579 in May, while a Model X sport-utility vehicle costs about 927,200 yuan now, versus 775,579 yuan in May, according to its website.

China slapped retaliatory tariffs on U.S. in response to U.S. Donald Trump's move to impose tariffs on $34 billion worth of Chinese goods.

China's tariffs are expected to hurt automakers as well as companies that make industrial components in the United States, and produce soybean, whisky and other agricultural produce.

NEW TESLA PLANT

Tesla's price increases come as it plans to build a factory in to serve the Chinese market. The company ships more than 15,000 cars a year to China.

is expected to visit on Tuesday, reported, citing people familiar with the plans. Musk will also visit on Wednesday and Thursday, said, quoting one of the sources.

A Tesla did not respond to a request for comment.

German BMW, which also makes cars in the to sell in China, has also flagged that it will raise prices on vehicles it makes in Spartanburg, It said on Friday that it was unable to "completely absorb" the new tariffs.

Daimler AG, another German automaker which imports U.S.-produced cars into China, said in a statement over the weekend that it "aims to maintain a competitive position" in China.

said on Thursday it would not hike prices on its imported cars for now, crimping its profit margins.

($1 = 6.5997 Chinese yuan renminbi)

(Reporting by Vibhuti Sharma and Sonam Rai in Bengaluru, Brenda Goh and Adam Jourdan in Shanghai, Norihiko Shirouzu in Beijing, and Karishma Singh in Singapore; Additional reporting by Shanghai Newsroom; Writing by Sayantani Ghosh; Editing by and Stephen Coates)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, July 10 2018. 10:12 IST
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