Tesla urges tariff exemption for Chinese-made computer car ‘brain’

  • Company is one of several carmakers that have asked the US government for relief from costly tariffs imposed during the trade war with China
PUBLISHED : Saturday, 05 January, 2019, 9:21am
UPDATED : Saturday, 05 January, 2019, 8:54pm

Tesla has asked the Donald Trump administration to exempt the Chinese-made computer “brain” of its new Model 3 car from 25 per cent tariffs imposed in August, saying they threaten the electric carmaker’s bottom line.

“Increased tariffs on this particular part cause economic harm to Tesla, through the increase of costs and impact to profitability,” the company said in a previously unreported request for tariff relief from the government.

Led by tech billionaire Elon Musk, Tesla is among a host of companies, including top US carmaker General Motors, to warn of growing costs related to the tariff war between the world’s two largest economies.

The Chinese-made computer, used by Tesla in the car assembled in Fremont, California, was among US$16 billion in imports that were hit with 25 per cent tariffs by the United States Trade Representative’s Office in 2018.

In a redacted request posted on a government website by the USTR on December 17, Tesla did not identify the supplier of the computer. But it said it had been unable to find another manufacturer “with the required specifications, at the volume requested and under the timelines necessary for Tesla’s continued growth”.

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Tesla, which called the Model 3’s computer “the brain of the vehicle”, added that “choosing any other supplier would have delayed the [Model 3] programme by 18 months with clean room set-up, line validation, and staff training”.

Using a new supplier “substantially increases the risk of poor part quality that could lead overall vehicle quality issues that would impact the safety of our vehicles and the consumer acceptance of the final product”, Tesla said in its request for tariff relief.

Tesla declined to comment on the tariff matter on Friday. But it has been aggressively cutting costs as it tries to meet production goals for the Model 3, which has become a top-selling luxury car on the US market.

Other carmakers have sought similar exemptions but have not received an answer.

GM in late July sought an exemption to a 25 per cent US tariff on its Chinese-made Buick Envision. The car accounted for nearly 15 per cent of US Buick sales last year, even as sales fell 27 per cent.

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In October, GM also sought exclusions for about two dozen parts, including push button ignition switches and transmission bearings. Nissan Motor and Fiat Chrysler have also filed exclusion requests for parts, while Uber Technologies asked for an exclusion for electric bikes rented through its app.

The Trump administration has imposed 25 per cent tariffs on a total of US$50 billion in annual Chinese exports and 10 per cent tariffs on an additional US$200 billion in Chinese exports. The tariffs were in response to what the Trump administration called China’s unfair trade practices.