The California-based electric car maker Tesla has received a boost from the nation with the world’s largest auto market—China.
As part of a declaration posted Friday by the country’s Ministry of Industry and Information Technology, Tesla is receiving an exemption from a 10-percent purchase tax.
The news, which is part of a broad policy applying to domestic electric vehicles, comes after a visit from Elon Musk to the company’s Gigafactory 3 in Shanghai and, prior to that, a widely publicized AI debate with Jack Ma, the founder of Alibaba, at the World Artificial Intelligence Conference.
According to China Daily, Tesla was also included in Shanghai’s Pilot Free Trade Zone on August 20—a move that will place the company at a further financial advantage.
Tesla has already achieved a level of favored status from the Chinese government. Production facilities from foreign automakers in China have traditionally been required to form 50/50 joint ventures with local automakers, but Tesla is the first to operate one itself—under a special cooperation agreement that will involve the government to some degree. The Gigafactory 3, as Tesla calls it, is ramping up to start production of the Model 3 sedan later this year.
The new sales tax exemption covers the entire current lineup: Tesla Model S, Model X, and Model 3. Tesla has announced that it plans to build the Model 3 and upcoming Model Y crossover locally in China, for the Chinese market—with higher margins expected for those vehicles than for those Tesla makes in the U.S.
As an analyst noted to Reuters, this move doesn’t mean that punitive tariffs are off the table—and that could be a future financial burden of its own. Last week the Chinese government said that auto tariffs that were paused in April may be resumed in December. That would include a 25-percent tariff on cars from the U.S., like the Model S and Model X, which are still expected to be produced in California, for China.
