Tesla To Sign MOU For Giant China Factory As Trade War Creates Sense Of Urgency For Musk

On Monday, Electrek reported that Tesla is raising the price of the Model S and Model X in China by 150,000 yuan to 250,000 yuan (~$22,600 to ~$37,600) on the heels of Friday’s escalation in the trade conflict between Washington and Beijing.

The news came just days after BMW’s announcement that it could not (or would not) absorb the impact of China’s countermeasures on cars built in the U.S. and would thus raise prices to Chinese consumers on some models.

The implication of the BMW news was clear: the automaker will try to pass the cost of the tariffs on to end customers in the Chinese market, but if that doesn’t work (i.e., if they lose market share), they will almost invariably consider reducing investment in the United States.

In other words: Trump’s trade war is already affecting U.S. jobs, just as everyone warned it would and as you’re probably aware, BMW’s price hikes came just a week (give or take) after Harley-Davidson and General Motors issued their own warnings about the possible implications of the trade war on U.S. jobs and production.

In the course of covering Monday’s Tesla news, we noted that according to Bloomberg, Elon Musk was set to meet Chinese government officials at an event in Shanghai on Tuesday.

Fast forward 24 hours and Bloomberg is out reporting that Musk’s push to establish production in China is now moving ahead quickly in light of the tariffs. Specifically, sources say Tesla “is planning a factory in China with a capacity for 500,000 vehicles a year.” Here’s Bloomberg:

Tesla is due to sign a memorandum of understanding with local entities in Shanghai, the people said, asking not to be identified as the information isn’t public.

[…]

While Tesla has been working on setting up production in China for more than a year, President Donald Trump has been trying to bolster manufacturing in the U.S. Tesla follows Harley-Davidson Inc. in expanding outside the U.S., underscoring the urgency with which companies are moving to avoid damage from escalating trade disputes.

Tesla said a year ago it was working with the Shanghai government to explore local manufacturing. Since then, production in China has become even more compelling: Last week, in response to tariffs imposed by the U.S., China increased the import duty on U.S.-made cars to 40 percent, prompting Tesla to raise prices. A plant in China also reduces shipping costs and potentially makes sourcing components more economical.

I’d say that’s more evidence that the trade war is putting U.S. jobs at risk, but Tesla was already laying people off anyway, so I’m not entirely sure that would a fair assessment of the near-term dynamics.

It is, however, completely fair to say that assuming Tesla doesn’t end up going broke or getting shut out of capital markets thanks to Musk alienating Wall Street (and neither of those things are safe assumptions), over the longer-term this will ultimately mean less U.S. jobs, especially to the extent Musk finds it easier to operate in foreign markets.

We’ll now look forward to the Twitter war between Musk and Trump.