China to exempt Tesla cars from 10% purchase tax

BEIJING — China will exempt Tesla Inc’s electric vehicles from its purchase tax, the Ministry of Industry and Information Technology (MIIT) said on Friday, a concession made amidst trade tensions with the United States.

Tesla sees China as one of its most important, growing markets, and the exemption from a 10% purchase tax could reduce the cost of buying a Tesla by up to 99,000 yuan ($13,957.82), according to a post on Tesla’s social media WeChat account. Sixteen variants – all the Tesla models sold in the country – are listed on a document issued by MIIT on its website, including Model S, X and 3.

No reason was given for the decision to exclude the cars from the tax, but it comes as Tesla is expanding in China, with a new factory and visits by Chief Executive Officer Elon Musk.

Tesla’s plant in Shanghai will be its first overseas factory, and the company is gearing up for a major Chinese sales push by promoting racing events, showroom parties with DJs and a line of Chinese Tesla stickers for chat apps.

Musk has met with senior leaders, including China’s Vice President Wang Qishan, and the transportation minister.

He also has publicly praised China in the midst of tensions with the United States, thanking the Shanghai and national governments for support, calling national leaders “very thoughtful” and describing China’s “amazing” progress in sustainable energy, transport and space.

“This year they did more orbital launches than the USA for the first time,” Musk, who also is the chief executive of rocket maker SpaceX, tweeted in December.

Amazing space progress by China. This year they did more orbital launches than the USA for the first time. https://t.co/rIks4ZHuCO

— Elon Musk (@elonmusk) December 23, 2018

“It is pretty clear Tesla is committed to China, with the investment in the Shanghai Gigafactory. Those relationships probably helped Tesla lobby for a successful exemption from the tax,” Roth Capital analyst Craig Irwin said.

“Now we need to closely watch the build out of the Shanghai Gigafactory and Model 3 volume ramp in China,” Irwin added.

Tesla did not respond to a Reuters request for comment.

While the company does not disclose sales by country, consultancy firm LMC Automotive estimates sales of 23,678 Tesla vehicles in China in the first seven months this year, nearly double the number of cars it sold a year earlier.

Shares of the company were up 1.5% at $225.01 in early Fridat afternoon trading.

($1 = 7.0928 Chinese yuan renminbi)

Reporting by Yilei Sun, John Ruwitch, Beijing Monitoring Desk and Vibhuti Sharma.