Tesla loses USA subsidies as it hits 200,000 sales mark

Alicia Cross
July 16, 2018

Following months of tension, start-stop negotiations and some Chinese concessions, the United States on Friday pulled the trigger on 25 per cent duties on about USD34 billion in annual imports of Chinese machinery, electronics and high-tech equipment, including autos, computer hard drives and LEDs.

Earlier this year, amid concerns they could miss the federal tax break, some potential buyers of Tesla's long-delayed Model 3 sedan began seeking alternatives, including GM's Bolt, according to postings by would-be Tesla buyers on websites and interviews with GM dealers.

Electric auto producer Tesla says it will build its first factory outside the United States in Shanghai. Thus, it would have caused the tax credits start to phase out one full quarter after Q3, so as of January 1, 2019.

In typical fashion, Tesla CEO Elon Musk was beyond optimistic about the company's ability to ramp up Model 3 production.

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The step is logical for a company that looks to China as its No. 2 market.

Still, CNBC said Tesla's shares rose to 1.2 percent shortly after their announcement. In a statement that would ultimately go on to haunt him, Musk said that Model 3 production would reach 5,000 units per week by the end of 2017.

The incentive program was established to help jump-start the electric vehicle industry by subsidizing the costs of developing new technologies in its early years. But since then, reports concerning the working conditions at Tesla factories have been pouring in. "I think it's really coincidental". China retaliated by imposing an nearly identical tariff, meaning Chinese consumers who want to own a Tesla will have to spend an additional $30,000. As Tesla wrote in an annual report filed with the US Securities and Exchange Committee in February, its customers get the full $7,500. The company produced 5,031 Model 3s in the last week of the second quarter, meeting a target that Mr Musk had said was crucial to generating cash and earning profit. Musk and his team made a big bet that automation would help Telsa make more cars in a single month than it ever had before, only to have robots repeatedly fail, forcing the company to halt the entire production process to fix the problem.

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