Exclusive: Tesla considering exporting electric vehicles from Shanghai to the US and Canada

SHANGHAI (Reuters) – Two people familiar with Tesla’s plan told Reuters that Tesla has considered plans to export electric cars made in China to the United States and Canada, a move that would connect its largest factory to North America. Its biggest market.

Tesla has assessed whether its Model 3 and Model Y electric cars made at Gigafactory Shanghai in North America could be sold as soon as next year, according to the people, who declined to be named because the process was confidential.

They said that Tesla’s evaluation included consideration of whether parts made by Tesla suppliers in China would be compliant with regulations in the United States and Canada.

One person said the Shanghai plant was working on an initial plan to conduct testing of a small batch of vehicles in the first quarter of 2023 that would be compliant with North American standards for potential export.

After Reuters published its article on Friday, Tesla CEO Elon Musk said on Twitter a “mistake” without going into details. Reuters contacted representatives of Tesla, based in Austin, Texas, and did not comment or clarify Musk’s remark. A Tesla representative in China responded with a screenshot of Musk’s denial.

Reuters was unable to determine whether Musk’s suspension would affect the feasibility study that Tesla has begun on exports from China to the United States and Canada, or the implementation of the plan.

A review of potential exports to North America from Shanghai has been developing as recently as the past two weeks, according to people who spoke to Reuters and a note detailing some of the steps the Shanghai plant is taking to test its readiness by early 2023, seen by Reuters.

Tesla won’t be the first US automaker to ship cars made in China to the US. General motors (GM.N) Buick Envision imported SUVs and unsuccessfully petitioned for a 25% waiver of US tariffs imposed by the Trump administration.

So far, Tesla’s strategy has been to build the cars it sells in North America at its plants in Fremont, California, and Austin, Texas.

Tesla’s Shanghai Gigafactory has the capacity to produce 1.1 million electric vehicles annually after an upgrade earlier this year, making it Tesla’s most productive manufacturing center.

The Shanghai factory makes Model 3 sedans and Model Y cars for sale in China and for export to markets including Europe, Australia and Southeast Asia.

Until recently, Tesla sold or shipped for export every vehicle it could produce in Shanghai, but inventory levels rose by their largest margin ever in October, according to data from brokerage CMBI.

In addition, factors including the depreciation of the yuan against the US dollar, lower raw material prices in China and higher Tesla prices and new car prices in the US have combined to make exports from China to the US potentially cost-competitive. Knowing the plans he said.

The US part of the export plan, if implemented, could create a new complexity for Tesla buyers. Analysts said that under the terms of support for new electric cars and the production incentive plan signed by US President Joe Biden, the incentive available for an individual car could vary depending on whether it was imported.

Tesla is widely seen as one of the main recipients of the Biden Administration’s Inflation Reduction Act (IRA), which offers rebates of up to $7,500 on electric vehicle purchases as part of a law designed to push automakers to reduce their dependence on China.

In a filing to the Ontario government in July, Tesla said it was working with officials there as part of an effort to set up an “advanced manufacturing facility” in Canada.

Tesla is also ramping up production at a factory it opened in Berlin earlier this year. One of the sources said that the production of this plant will reduce the need for some exports from China.

At the same time, the price gap between Tesla cars sold in China and the United States is widening, reflecting higher American prices and new discounts in China. This means that Tesla cars will likely be exported to North America at a competitive price.

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In China, where CMBI analysts have warned of a coming “price war,” Tesla cut initial Model 3 and Model Y prices in China by 9% last month.

On Monday, it offered an additional discount to buyers who took in this month and purchased insurance from a Tesla partner.

Tesla sells the Model Y for $49,344 in China, compared to the US price of $65,990. Cars made in China face a US tariff of 27.5%, while light trucks face a tariff of 25%.

China, the world’s largest car market, imposes a 15% tariff on imported cars.

In 2018, before commissioning a Tesla plant in Shanghai, Musk asked then-President Donald Trump to raise tariffs on cars imported into the United States from China in order to achieve a “fair outcome” as both sides had equivalent and “equally moderate” tariffs. . .

(dollar = 7.2511 Chinese yuan)

(Reporting by Zhang Yan, Brenda Goh) Writing by Kevin Kroliky. Editing by Anna Driver and Praveen Shar

Our criteria: Thomson Reuters Trust Principles.

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