Tesla News: Elon Musk's Electric Car Company Receives 10% Sales Tax Exemption In China

Elon Musk's Shanghai visit has proven to be a boon for his luxury electric vehicle company Tesla, as it was announced Friday that all Tesla vehicles sold in China will be exempt from a 10% sales tax.

Normally, Chinese auto buyers would have to pay a 10% purchase tax on any car they buy in the country. The exemption could save Chinese consumers up to 99,000 yuan or $13,957.82 on a Tesla vehicle.

The tax exemption is another way that the Chinese government is trying to increase the sales of electric vehicles in the country, as it seeks to reduce carbon emissions and pollution from fossil fuels.

The move comes as Tesla is increasing prices in China for U.S.-imported cars, with Model 3 vehicles going from the equivalent of $49,750 to $50,870 in the country. The devaluation of the yuan and the U.S.-China trade war are major reasons for the increase.

In December, the Chinese government will apply tariffs of 40% on all American vehicles entering China.

Tesla is currently taking measures to get around the tariffs, as it is currently building its Gigafactory 3, the first wholly foreign-owned automobile manufacturing plant in China.

When the Gigafactory begins to manufacture Model 3 cars in China later this year, they will sell at $45,860, which is cheaper but still expensive relative to the Chinese auto market. The Model X and Model S will still be imported from the U.S., which means they will be slapped with the tariffs.

China, the world's biggest auto market, has seen a drop of over 12% in car sales over the first six months of 2019. China's electric vehicle market has rapidly increased over the past two years, but sales of plug-in hybrid vehicles fell 20.6% in year-over-year sales in July.