Elon Musk. Picture: REUTERS
Elon Musk. Picture: REUTERS

Shanghai — Tesla won exemption from a 10% Chinese tax on automotive sales, sidestepping trade tensions with the US following CEO Elon Musk’s visit to the country.

The exemption, which typically is reserved for domestic makers of electric vehicles, affects all Tesla models sold in China, the nation’s industry ministry said Friday on its website. The electric-carmaker’s shares jumped as much as 4.8% shortly after the open of regular trading.

China’s concession to one of the US’s most high-profile companies comes amid heightened uncertainty as to where the trade war between the two countries is headed. A week ago, US President Donald Trump ordered US companies to immediately begin looking for alternatives to China, only to later suggest that tensions were cooling.

The exemption also sends a signal that the Chinese vehicle market, the world’s biggest, is open to competition, said Yale Zhang, MD of AutoForesight, a Shanghai-based vehicle consultancy.

“It clearly shows the state’s attitude in introducing a strong competitor” in new-energy vehicles, Zhang said. “For those domestic EV makers, now if you don’t run fast enough, you’ll be beaten up.”

During a two-day visit, Musk made an appearance at the World Artificial Intelligence Conference in Shanghai, debating Alibaba Group Chairman Jack Ma onstage. He also spoke with local authorities and toured a new gigafactory being built about 70 kilometers away from the city center. That was followed by a meeting with China’s Minister of Transportation, Li Xiaopeng, on Friday in Beijing, according to government news reports.

A Tesla spokesperson did not respond to a request for comment. The stock’ increase to as high as $232.44 on Friday was the biggest intraday jump since July 3.

The sales-tax reprieve could partially offset retaliatory tariffs that may be put on Teslas and other US-built cars laterin 2019. China announced last week that it would increase tariffs on US cars by 25 percentage points to 40% on Dec. 15, in reaction to new levies the Trump administration plans on Chinese exports. Analysts at Evercore ISI estimate that Tesla will incur $620m in incremental cost if the higher duties are imposed.

Tesla currently imports all of the cars it sells in China but plans to make the Model 3, its best-selling vehicle, at the new plant starting late in 2019. The company raised prices in China on Friday as trade tension weighs on the country’s currency.

The price of a basic level imported Model 3 sedan went up more than 2% to 363,900 yuan ($50,900), Tesla’s website showed on Friday. Base prices for Model S sedans and Model X sport utility vehicles increased by a similar percentage, to 793,900 yuan and 809,900 yuan, respectively.