China to take down the import tax on imported autos from 25% to 15%. This is actually very good news for Tesla.
Good news for Tesla:
Every Tesla vehicle which is sold in China is important. Also, China is a big market for Tesla. It contributes about 19% to the automotive revenues of Tesla. As a result, any reduction of import duties is a huge positive for Tesla. In addition to that, China is also the largest automotive market. Also, Tesla has just now tapped into the Chinese market. It has a long way to go in terms of growth.
Tesla can benefit from the move in 2 different ways which are:
- Improvement in margins if duty cut is not propagated forward
- Lowering the cost of the vehicles which will result in higher market share
Model Y of Tesla is just around the corner. As a result, any import duty cut will be pretty positive for the company. It will result in increased model y demand. With the announcement being closer, it will help Tesla easily sell more vehicles.
At the same point in time, any further benefits will ensure that Tesla is able to garner even higher market share. Also, when it comes to the impact on revenues of Tesla, you will realize that at least 20% growth is expected to come, due to this very announcement. The vehicles can get more affordable quite easily. Addition to that, Tesla will certainly become more accessible for Chinese consumers.
Recently, Tesla has been receiving a lot of bad publicity. The latest model is not up to the mark. There are breaking problems in the latest model as well. As a result, any good news for Tesla will be welcomed by the company. The company is also dealing with various performances -related issues in the latest models as well.
This news from the Chinese market will indeed help in increasing the volumes for the company. Also, since China is the largest automotive market, a slight uptick in volumes can result in a huge benefit for a company like Tesla. It can easily turn around the fortunes of the company which is an added advantage. That is why, even though, it might not be huge news for some of the other bigger automakers but for Tesla, it is certainly is a highly positive news which will actually help the company in the longer term.