Tesla has abruptly ceased taking orders for its flagship electric vehicles, the Model S and Model X, in China, a move likely stemming from the ongoing U.S.-China trade war.
The U.S. has imposed steep tariffs of 145% on Chinese goods, prompting China to retaliate with an 84% tariff on American imports, including automobiles. These tariffs will nearly double the cost of American vehicles entering China, including Tesla’s premium offerings.
The decision to halt orders comes as Tesla grapples with the implications of these tariffs on its pricing strategy.
Steep Tariffs Impact Tesla’s Pricing Strategy for Model S and Model X
Currently, the Model S and Model X are exclusively manufactured at Tesla’s Fremont factory in California and imported to China, unlike the more popular Model 3 and Model Y, which are produced at Gigafactory Shanghai for local sales and some exports.
This suspension does not significantly impact Tesla’s overall sales in China, as the company sold only 2,000 units of the Model S and Model X in 2024, compared to a staggering 90% of sales from the more affordable Model 3 and Model Y.
While the impact on Tesla’s bottom line is estimated at approximately $170 million, it’s essential to note that these premium models, unlike their lower-margin counterparts, are indeed profitable for the company.
Moreover, the inventory for the Model S is low, with virtually no new Model X vehicles available for sale, which may limit future sales even further.
The broader implications of the escalating trade tensions could pose risks beyond just these models. Should the trade war deepen, it may affect Tesla’s operations in China and potentially the status of its Shanghai factory, which holds significance as a fully foreign-owned auto manufacturing plant in the country.