China to roll back extra tariff on US car imports for three months, in likely boon to Tesla

China will roll back an extra tariff it slapped on US car imports for three months, the State Council, the government cabinet, announced Friday, in a likely boon to US electric car maker Tesla.

The tariff will be rolled back to 15 per cent – the tariff now applied to all foreign car imports – from the 40 per cent rate China imposed in July in retaliation for the first round of US tariffs on Chinese imports imposed that month. The reprieve will commence at the start of the new year.

Tesla, which is competing against dominant domestic electric car makers in the world’s largest auto market, announced after the State Council’s move that it will reduce the prices of its cars sold in China. For example, the price of its Model S 75D will be cut by 84,200 yuan (aboutUS$12,200), according to the company’s Chinese website.

Tesla has been hard hit by the tariffs. Unlike General Motors and Ford, it does not have a partnership with domestic players to produce cars in China. In July, Tesla raised prices of its cars in China by about 20 per cent because of the added costs from the extra tariffs.

The price hike resulted in a plunge in Tesla sales in China. The China Passenger Car Association (CPCA) put the drop at 70 per cent, but Tesla disputed the figures. Facing reduced sales, Tesla cut prices on Model S salon and Model X SUV by 12 per cent to 26 per cent, respectively, in late November for what it described as a move to make Tesla cars affordable to Chinese customers.

China will also roll back the extra tariffs on car parts imported from the US, the State Council said.

The move is the latest positive sign that trade negotiations to defuse the on-going trade war between China and the US are bearing fruit. Earlier this week, China purchased up to 2 million tonnes of US soybeans, the first such purchases since the beginning of the trade war in July.

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