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Tesla said it expects tariffs on Chinese parts to cost around $50 million during Q4

Mark Matousek   

Tesla said it expects tariffs on Chinese parts to cost around $50 million during Q4

Elon Musk

Max Whittaker/Getty Images

Tesla CEO Elon Musk.

  • Tesla said on Wednesday in its third-quarter earnings letter that it expects tariffs on parts made in China to cost around $50 million during the fourth quarter of this year.
  • The automaker said it expects gross margins on its Model S sedan and Model X SUV to fall slightly due to increased tariffs on Chinese parts.
  • Gross margins for the Model 3 sedan should remain stable, Tesla said, due to manufacturing cost efficiencies and fixed cost absorption.

Tesla said on Wednesday in its third-quarter earnings letter that it expects tariffs on parts made in China to cost around $50 million during the fourth quarter of this year.

The automaker said it expects gross margins on its Model S sedan and Model X SUV to fall slightly due to increased tariffs on Chinese parts, which it said will not be completely offset by cost efficiencies in its manufacturing process. Gross margins for the Model 3 sedan should remain stable, Tesla said, due to manufacturing cost efficiencies and fixed cost absorption.

Model 3 gross margin exceeded 20% during the third quarter, while the total gross margin for all of its vehicles neared 26%.

Tesla posted adjusted earnings of $2.90 per share (compared to an analyst forecast of -$0.15 per share) on $6.8 billion in revenue (compared to an analyst forecast of $6.315 billion) during the third quarter.

Other automakers, like BMW, Ford, and Honda, have said tariffs on steel and aluminum imposed by President Donald Trump's administration have had a negative impact on their financial performance. The Trump Administration announced tariffs on foreign-made steel and aluminum in March, part of a series of proposed and enacted tariffs that have resulted in retaliatory measures from China and increased tensions between the US and China.

Have a Tesla news tip? Contact this reporter at mmatousek@businessinsider.com.

Get the latest Tesla stock price here.

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