Tesla Inc. has plans to increase prices in China which remains to be the world's largest market for electric vehicles. The price hike is reportedly happening on August 30, earlier than the previously reported.
The electric vehicle maker is also planning to implement another price hike by December, according to unnamed sources who spoke with Reuters. The sources said the looming price hikes were driven by the ongoing China-US trade dispute. Tesla had to adjust prices for multiple times over the past year for the same reason.
The sources said that Tesla also has plans to ship more cars in China before 2019 ends. Tesla has yet to confirm or deny the Reuters report as of publication.
The supposed August 30 price hike, if true, would be earlier than Reuters' previous report of a September price hike. The consecutive plans to increase prices were fueled by a slowdown in the value of yuan, apart from several market headwinds. Further, Tesla currently imports most of its cars it sells in China which could fuel more price hikes in the future.
Tesla is currently building a factory in Shanghai intended to shield the company from tariff hikes as China-US dispute continues. The company is hoping to finally start manufacturing cars in China by the end of the year to put an end to multiple price hikes.
The electric vehicles maker has been investing heavily in China. In July, Tesla agreed to pay China $323 million in tax yearly to continue building its Shanghai facility. Further, the agreement requires that Tesla must generate annual tax revenues at the end of 2023 and spend $2 billion in capital expenditure on the Shanghai factory over the next five years. Tesla's failure to do so would cancel out the land lease it has with the Shanghai government.
China continues to be the most attractive market for electric vehicles. The domestic market expanded 72 percent in 2018 compared to 2017. That same year, China had a larger electric vehicle market than Europe and the United States combined.
The market has been fueled by subsidies and regulations implemented by the Chinese government to push a greater adoption rate for green cars.
Meanwhile, the worldwide market for electric vehicles peaked at one million units in 2017. According to McKinsey's Electric Vehicle Index, electric vehicle makers around the world could produce four times that number by 2020. The index estimated there would 4.5 million units to be sold by 2020, making up 5 percent of the overall global light-vehicle market.
