Tesla rushes Model 3s to China before trade war truce expires on March 1

At least three ships about the length of two football fields are slated to arrive at ports in China by the end of this month, each carrying precious cargo from Elon Musk.

Tesla is loading as many Model 3 sedans as it can onto vessels destined for the People’s Republic ahead of March 1, when a trade war truce between presidents Donald Trump and Xi Jinping is expected to expire. Musk fears the two countries could ratchet tariffs back up, which would make the chief executive’s electric cars more expensive in China and boost costs of key components the country sends to his US assembly plant.

Tesla to produce cheaper versions of Model 3 electric cars in Shanghai, taking the competition to would-be ‘Tesla killers’

Other carmakers are at risk of seeing expenses rise again if the trade war flares back up. But Musk is in perhaps the most precarious position in the industry. Global giants such as BMW and Daimler can wiggle around the tariffs to an extent by boosting production at existing China factories, but Tesla’s manufacturing presence there was merely a muddy field as of last month. It will not be assembling any vehicles in China until the end of 2019 at the earliest.

“They’re uniquely exposed,” said Robin Zhu, an analyst at Sanford C. Bernstein.

Musk, 47, said getting cars to China before a potential increase in tariffs was a key priority when Tesla reported a smaller-than-expected profit on January 30. Higher duties would combine with already elevated transport and labour costs to make the company’s vehicles much pricier than competitors’. Plus, imported electric cars are not eligible for local tax credits.

“Our car is just very expensive going into China,” Musk said on the earnings call. “The demand for Model 3 is insanely high. The inhibitor is affordability.”