Tesla should be impacted the least by the Biden Administration’s increased tariffs on Chinese-made electric vehicles—so long as they don’t spark a backlash among Chinese officials.
President Biden has proposed quadrupling import tariffs on Chinese cars to about 100% from the current 25%. The lower tariff was enough. There are no Chinese-branded passenger cars on sale in the U.S.
At 25% or 100%, the tariffs offer protection for domestic EV producers including Tesla,
and
Tesla, of course, is the biggest beneficiary of protection. It has some 50% of the U.S. EV market.
Tesla’s market share in China is about 12%, about half that of leader
BYD
.
Still, Tesla can boast the best-selling EV in the Chinese market. The Model Y has sold some 630,000 units in China over the past 12 months ending in March.
The Model Y is also the second-best-selling non-pickup truck in the U.S., trailing only the
RAV4.
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The success of the Model Y holds lessons for investors. The car, of course, has to be something customers want. Local production is important too. Telsa builds Model Y crossover-sized vehicles in the U.S. It also builds them at its wholly-owned plant in Shanghai.
Local production is the best way to scale a car business in any region. Local production for Tesla was an existential imperative. Telsa only makes battery-powered cars, and China is the largest market for new all-electric vehicles with some 7.7 million sold over the past 12 months. That’s more than double the amounts sold in the U.S. and Europe combined.
The size of the Chinese market is one reason Chinese car companies haven’t branched out that much in the recent past. They have started to export though. BYD has exported about 10% of its production over the past 12 months ended in March. Eventually, Chinese car companies will have to copy Tesla and build capacity and distribution in North America if they want to sell cars in the U.S. That will take a while.
Tesla stock was up 2.3% to $175.66 on Tuesday, while S&P 500 and
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futures each rose less than 0.1%.
Tesla stock is trying to make it two days in a row. Shares snapped a four-day losing streak on Monday, rising along with most electric-vehicle stocks in a wild day for the sector.
shares gained 2%, closing at $171.89, while the
ended down slightly.
The big winner was
Shares added almost 52%. Determining exactly why VinFast stock made that massive jump isn’t easy. Several meme-like stocks made big moves.
and
shares rose about 74% and 78%, respectively.
VinFast,
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GameStop
,
and AMC shares are all heavily shorted, meaning a significant portion of their shares available for trading has been borrowed and sold by bearish investors betting on stock price declines. Heavily shorted shares can be more volatile and prone to gains that feed on themselves as short sellers rush to cover their bets.
stock’s strong start may also have helped shares of other EV makers. The Chinese EV maker rose 35% on Friday in its first day of trading and it gained another 2.8% on Monday.
Shares of Chinese EV peers
and
gained 6.7% and 4.7%, respectively. Shares of U.S. EV start-ups
and
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gained 9.1% and 5.6%, respectively.
Fisker stock, which no longer trades on an exchange, rose 11.4% to almost 4 cents a share. Fisker needs cash to continue operating. The company announced Monday it secured a $3.5 million loan on Friday that it will use to pay operating expenses. The loan matures in June 2024.
It will be tough for the volatility on Tuesday to match Monday’s. President Biden might formally announce more tariffs on Chinese-made EVs. That should do something to EV shares.
Write to Al Root at allen.root@dowjones.com
