China will exempt Tesla cars from purchase tax

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China will exempt Tesla Inc’s electric vehicles from purchase tax, the Ministry of Industry and Information Technology (MIIT) said on its website, sending the company’s shares up more than 4% in early trading.

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FILE PHOTO: A Tesla logo is seen on a wheel rim during the media day for the Shanghai auto show in Shanghai, China April 16, 2019. REUTERS/Aly Song

BEIJING (Reuters) – China will exempt Tesla Inc’s (TSLA.O) electric vehicles from purchase tax, the Ministry of Industry and Information Technology (MIIT) said on its website, sending the company’s shares up more than 4% in early trading.

China currently levies a 10% purchase tax on the sale of each vehicle. The move could reduce the cost of buying a Tesla car 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 the document issued by MIIT, including Model S, X and 3. No reason was given for the decision to exclude the cars from the tax.

“That (tax exemption) would be great for Tesla, especially as China is the most important market for Tesla to become profitable,” Nord LB analyst Frank Schwope said.

“On the other hand, new punitive tariffs are not off the table yet, which can burden Tesla.”

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.

China offers a lot of potential for the Elon Musk-led company given its status as the world’s biggest electric vehicle market.

Tesla is already building a plant in Shanghai, the company’s first overseas factory, which is expected to start production by the end of the year and have an annual output capacity of 250,000 vehicles after including Model Y production.

The company is also making a major sales push in China by promoting racing events, showroom parties with DJs and a line of Chinese Tesla stickers for chat apps.

Reporting by Yilei Sun, John Ruwitch and Beijing Monitoring Desk; Additional reporting by Vibhuti Sharma in Bengaluru; editing by Jason Neely, Kirsten Donovan and Anil D’Silva


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China will exempt Tesla Inc’s electric vehicles from purchase tax, the Ministry of Industry and Information Technology (MIIT) said on its website, sending the company’s shares up more than 4% in early trading.

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