China Market situation and outlook

[GasDoc]

So, why do Chinese customers have to pay a second additional amount/deposit (which partly is for shipping costs) in advance, while European customers do not have to pay a certain second additional amount/deposit regarding shipping costs in advance?

Maybe the European auto manufacturers are willing to front this money because they make it up in the enormous markups that they sell cars for in China compared to the rest of the world.

Tesla is doing the right thing by not jacking up their profit margins just because the car is going to China.

V

 

[RobStark]

Maybe the European auto manufacturers are willing to front this money because they make it up in the enormous markups that they sell cars for in China compared to the rest of the world.

Tesla is doing the right thing by not jacking up their profit margins just because the car is going to China.

V

Most German branded cars are made/assembled in China to avoid the import duties.

I heard Elon say once Chinese sales hit 160k per year then Tesla will open a manufacturing plant there.

 

[GasDoc]

Most German branded cars are made/assembled in China to avoid the import duties.

Some German cars are manufactured there and avoid duties. There's still a booming grey market importing X5's, Cayennes, V6 GL450's and Range Rovers.

 

[Benz]

"Once a Model S is destined for China (after it’s built but before it’s shipped) Tesla requires an additional $40,000 deposit to pay shipping, taxes and import duties."

Meaning that the second additional deposit concerns not only import duties and taxes, but also the cost for shipping.

So, why do Chinese customers have to pay a second additional amount/deposit (which partly is for shipping costs) in advance, while European customers do not have to pay a certain second additional amount/deposit regarding shipping costs in advance?

Would be interesting to know whether customers from other Asian countries (Japan, Australia, New Zealand, etc.) will also have to pay an additional second amount/deposit, after having already paid the first deposit when they made a reservation for their Tesla Model S/X.

 

[markwj]

That's unfair towards the Chinese customers. Right?

Presumably Tesla are on the hook to pay those import duties when they bring the car into the country, so require the customer to pay at that time (otherwise if the customer cancels, Tesla would have to pay the duties themselves - as well as being stuck with the custom-configured car).

I don't think it is unfair, or violates Tesla's fair pricing commitment, as that explicitly states fair pricing excludes local duties and taxes.

 

[ItsNotAboutTheMoney]

Most German branded cars are made/assembled in China to avoid the import duties.

I heard Elon say once Chinese sales hit 160k per year then Tesla will open a manufacturing plant there.

Which, if you think about it, is Elon Musk saying that once they're maxed out at Fremont, the next factory will be in China.

 

[Benz]

Presumably Tesla are on the hook to pay those import duties when they bring the car into the country, so require the customer to pay at that time (otherwise if the customer cancels, Tesla would have to pay the duties themselves - as well as being stuck with the custom-configured car).

I don't think it is unfair, or violates Tesla's fair pricing commitment, as that explicitly states fair pricing excludes local duties and taxes.

I don't think that any Chinese customer is going to cancel their order after having paid two deposits. That would have to be a really emergency or really weird situation for that particular Chinese custormer, I think.

 

[RobStark]

Some German cars are manufactured there and avoid duties. There's still a booming grey market importing X5's, Cayennes, V6 GL450's and Range Rovers.

Most. Range Rover is British brand owned by Tata Motors of India.

Tata owns Jaguar Land Rover.

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Which, if you think about it, is Elon Musk saying that once they're maxed out at Fremont, the next factory will be in China.

They might open a Truck manufacturing plant and 2nd Gigafactory in the USA(Texas?) first.

Disappointing sales in Germany probably mean no European GF or manufacturing plant for a while.

 

[markwj]

I don't think that any Chinese customer is going to cancel their order after having paid two deposits. That would have to be a really emergency or really weird situation for that particular Chinese custormer, I think.

The issue I am pointing out is that the customer pays an initial deposit (US$5k?) and Tesla builds the car to specification. Then, Tesla imports the car to China and has to pay US$40k import duties. Then, the customer refuses delivery - Tesla is out the cost of the car plus US$40k import duties, and is compensated US$5k deposit.

The purpose of the initial US$5k deposit is to offset Tesla's losses on the custom build of the car, should the customer back out after confirmation but before import. The purpose of the subsequent US$40k top-up deposit is to offset Tesla's losses on the import duties, should the customer back out after import.

 

[Benz]

The issue I am pointing out is that the customer pays an initial deposit (US$5k?) and Tesla builds the car to specification. Then, Tesla imports the car to China and has to pay US$40k import duties. Then, the customer refuses delivery - Tesla is out the cost of the car plus US$40k import duties, and is compensated US$5k deposit.

The purpose of the initial US$5k deposit is to offset Tesla's losses on the custom build of the car, should the customer back out after confirmation but before import. The purpose of the subsequent US$40k top-up deposit is to offset Tesla's losses on the import duties, should the customer back out after import.

Understood.

But the subsequent US$40k top-up deposit is NOT ONLY to offset Tesla's losses on the import duties, should the customer back out after import. But ALSO for shipping costs, right?

And customers from Hong Kong don't need to pay a subsequent US$X top-up deposit to offset Tesla's losses on the shipping costs, should the customer back out after import/transport, right?

That is a clear difference in the way Tesla Motors demands the payment for the Tesla Model S to be made (between customers from China and customers from Hong Kong), right?

 

[markwj]

Shipping costs are perhaps US$2,000. Trivial compared to the China import duties. Hong Kong has no import duties.

 

[Benz]

Shipping costs are perhaps US$2,000. Trivial compared to the China import duties. Hong Kong has no import duties.

That's true, the concerned amount for shipping costs per car are not that high.

As the delivery numbers of the Tesla Model S/X to Asia and to Europe (later on to South America, Africa and Middle East as well) will increase considerably in the coming years, and the total amount concerned/involved for shipping costs will increase considerably as well, shouldn't Tesla Motors demand a second deposit for the shipping costs from all their customers (to treat all customers equally)?

 

[markwj]

That's true, the concerned amount for shipping costs per car are not that high.

As the delivery numbers of the Tesla Model S/X to Asia and to Europe (later on to South America, Africa and Middle East as well) will increase considerably in the coming years, and the total amount concerned/involved for shipping costs will increase considerably as well, shouldn't Tesla Motors demand a second deposit for the shipping costs from all their customers (to treat all customers equally)?

Given the US$5,000 deposit, I don't think Tesla is too worried. The exposure on US$38,000 of import duty would be much more of a concern. That said, there are other markets where there are import duties and it will be interesting to see what Tesla does there.

 

[CHGolferJim]

Is there an additional layer of payment risk for exports to China related to order cancellation or contract enforcement? My direct experience is a little dated, but contract enforcement used to be kinda dodgy in some circumstances.

 

[hiroshiy]

FYI in Japan we don't need second deposit (just $35k for sigs and $5k for GP). No import tax for cars since 1978.

 

[Benz]

FYI in Japan we don't need second deposit (just $35k for sigs and $5k for GP). No import tax for cars since 1978.

OK, thank you for letting us know that.

So far, China is the only country where a second deposit is required.

 

[RobStark]

Just found out no import duties on American made cars imported into Australia as a result of the US-Australia Free Trade Agreement.

There is a 33% luxury car sales tax on the price of a car sold above the $75k Australian dollar threshold.

 

[Benz]

Just found out no import duties on American made cars imported into Australia as a result of the US-Australia Free Trade Agreement.

There is a 33% luxury car sales tax on the price of a car sold above the $75k Australian dollar threshold.

OK, that's interesting info too.

We will soon find out if an additional deposit will be required to cover for the 33% luxury car sales tax.

Our Tesla friends from Australia will inform us about it.

 

[RobStark]

OK, that's interesting info too.

We will soon find out if an additional deposit will be required to cover for the 33% luxury car sales tax.

Our Tesla friends from Australia will inform us about it.

Sales tax not import tax/duty/tariff.

Paid on sale not on importation.

 

[Benz]

Sales tax not import tax/duty/tariff.

Paid on sale not on importation.

That's right.

There you have it, no additional deposit to be made by customers from Australia either.

So, China really is one of the exceptions (so far).