Tesla Inc (Nasdaq: TSLA) continues to struggle to hit its Model 3 production targets and manage its finances, and Tesla investors certainly won’t be getting any help from China any time soon. In fact, analysts say Tesla will be hit harder by the latest round of Chinese tariffs than any other U.S. automaker.
China said earlier this week that it will be slapping an additional 25 percent tax on all imported U.S. automobiles. While all automakers will be subject to the tariff, Tesla’s business will be much more susceptible, Barclays analyst Brian Johnson says.
[See: The 10 Most Valuable Auto Companies in the World.]
Ford Motor Co. ( F), General Motors Co. ( GM) and Fiat Chrysler Automobiles ( FCAU) all have joint ventures with Chinese companies which allow them to assemble their automobiles in China and shield them from the tariffs. Tesla has no such partnership.
Last year Tesla generated $2 billion in revenue from China, roughly a third as much as it did in the U.S.
Johnson says the new tariffs could make the price of Tesla’s vehicles prohibitively high in China. Imported vehicles in China are already subject to a 25 percent tariff, so the new tariffs could potentially mean Chinese buyers are paying 50 percent more than American buyers.
“The tariff will add an extra premium on top of a vehicle price that was already ahead of the base U.S. price, related to transport costs and duties,” Johnson says.
Johnson said Tesla’s key market, lower-end luxury vehicles, is particularly susceptible to price changes.
“While these steep import tariffs are part of the upper-end luxury market (and in some respects add to the prestige factor for luxury cars), for lower-luxury vehicles [like] the Model 3, a 50 percent premium would be significant,” he says.
[See: 7 Auto Stocks to Drive Income.]
A drop-off in China sales is the last thing Tesla investors need after the company reported it reached a Model 3 production rate of about 2,000 vehicles per week in the first quarter, once again falling short of its 2,500-vehicle goal.
Despite a net loss of $2.24 billion in 2017, Tesla assured shareholders that it would not need to raise capital in 2018, but Morgan Stanley said on Wednesday they believe Tesla will conduct a $2.5 billion equity raise by the end of the third quarter.
Barclays has an “underweight” rating and $210 price target for Tesla. Morgan Stanley has an “equal-weight” rating and $379 target for TSLA stock.
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Tesla Inc (TSLA) Has a Big Problem With China Tariffs originally appeared on usnews.com
