China's tariffs are 'bad news for Tesla'

Joe Skipper/Reuters

SpaceX founder Elon Musk pauses at a press conference following the first launch of a SpaceX Falcon Heavy rocket at the Kennedy Space Center in Cape Canaveral, Florida, U.S., February 6, 2018.

• Tesla makes a considerable portion of its total sales in China.
• China's retaliatory tariffs would significantly damage Tesla's sales in the country.
• This spells bad news for Tesla, which has had its woes in 2018.

China's retaliatory tariffs on American goods could really sting for Tesla, an automotive economist told Business Insider.

Back in March, President Donald Trump slapped tariffs on imported aluminum and steel. And on Tuesday, Trump announced he wants to place additionally tariffs on Chinese products. In response, China announced Wednesday that it would place retaliatory tariffs of 25% on $50 billion of American goods, including automobiles.

"This is bad news for Tesla," Charlie Chesbrough, senior economist at Cox Automotive said. He added the tariffs are "certainly going to slow down sales."

Tesla did $2 billion of sales in China during 2017, accounting for about 17% of its $11.8 billion of revenue in 2017, according to its annual letter to shareholders.

With China's 25% tariff on American cars, "you're adding a tremendous amount of price on the vehicle," Chesbrough said.

A Tesla Model S currently costs $103,000 in China, according to Insideevs, citing Barron's data. With a 25% increase, the price would jump to $128,750.

The tariffs are the latest bit of bad news for Tesla, which has already had a rough 2018.

In late March, a Tesla Model X operating on Autopilot suffered a fatal crash, and days later CEO Elon Musk tweeted a joke about his company going bankrupt, sending shares tumbling.

The automaker has also seen its bonds come under pressure as its Model 3 production problems caused Moody's to downgrade its corporate rating.

Tesla shares are rebounding Wednesday, but still down 13% this year.

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