Briefing: Tesla denied US tariff exemption for Chinese-made CPU used in Model 3
Jun 14, 2019
What happened: The U.S. government denied Tesla’s tariff exemption request for the Chinese-made CPU used in its popular Model 3 sedan. In a letter dated May 29, the US Trade Representative’s Office said the component is “a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.” The CPU is manufactured by Quanta Shanghai. A separate exemption request by the supplier of the Model 3’s touchscreen, SAS Automotive USA Inc, was also denied.
Why it’s important: In a securities filing on April 29, Tesla wrote, “our costs for producing our vehicles in the US have also been affected by import duties on certain components sourced from China.” The company previously claimed that choosing a different CPU supplier would have “delayed the Model 3 launch by 18 months.” The 25% import tariff has also affected other US automakers, with General Motors stopping domestic sales of its Chinese-made Buick Envision, which accounted for nearly 15% of the brand’s sales in 2018.