Tesla exposed to greater risk as China retaliates with own tariffs

BEIJING -- Tesla Inc. needs to brace for another setback after China included electric cars among American products that it's targeting with additional tariffs in its counter-punch to the U.S.

While other autos imported from the U.S. were also on the list, Tesla is at a particular risk because it relies on American-made vehicles for all its Chinese sales. Other U.S. carmakers such as General Motors Co. and Ford Motor Co. manufacture in China.

China's announcement adds to a tough past few weeks for CEO Elon Musk and Tesla investors, with a string of bad news hurting the company's shares. China is the carmaker's biggest single market after the U.S., according to data compiled by Bloomberg, and an additional tariff threatens to give local manufacturers further pricing edge.

"The jump in tax levy hurts Tesla the most as it had not yet started local production in China," said Cui Dongshu, the secretary general of China's Passenger Car Association. "For GM and Ford, they can always make up with China-produced ones."

A Tesla spokeswoman based in Beijing wasn't immediately available to comment.

Tesla has been working with Shanghai's government since last year to explore assembling cars in China, but has yet to clinch a deal. An agreement hasn't been finalized because the two sides disagree on the ownership structure for a proposed factory, people with direct knowledge of the situation said in February.

The U.S. carmaker is already hindered by China's current 25 percent import tax that catapults the sticker price beyond the means of most consumers. An additional duty would further relegate Tesla into a niche marque only afforded by the most wealthy.

Tesla sold 14,883 vehicles in China last year, accounting for just 3 percent of the nation's battery-powered electric-vehicle sales and placing it as the No. 10 brand in that segment. China accounted for 17 percent of Tesla's revenue for 2017, according to data compiled by Bloomberg.

In the first two months of this year, 36,000 vehicles were imported from U.S., including Teslas, Lincolns and Mustangs, according to China's PCA. European carmakers such as Daimler AG and BMW AG also sell American made cars in China, according to PCA's Cui.

In February, China imported 2,323 vehicles with electric motors from the U.S., and 2,160 of those were Teslas.