The Trump Administration’s tariffs are starting to impact the auto industry. But Tesla just won an important waiver, relieving it of some potentially costly import taxes.
- Tesla won a waiver from the U.S. Commerce Department relieving the automaker of a 10% tariff on aluminum imported from Japan.
- The aluminum from Nippon Light Metal Co Ltd is used in the production of battery cells for Model 3 at the Gigafactory in Nevada.
- Tesla was denied another 25% tariff waiver request last year on a computer component imported from China used in its Autopilot system.
The U.S. Commerce Department announced earlier this month that it will be granting a tariff waiver filed by Tesla in April of this year. Specifically, the waiver applies to aluminum that Tesla imports from Japanese metal firm Nippon Light Metal Co Ltd.
Tesla uses the specialized aluminum in its production of battery cells at its Gigafactory in Nevada for use in the Model 3 and also its energy storage products. “Tesla is the only US manufacturer of these battery types and planned production of these batteries will increase exponentially over the next few years,” Tesla wrote in its petition.
The maker of pure-electric vehicles requested the waiver citing a lack of domestic supply for the particular aluminum product specifications. In its request, Tesla said aluminum “is not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.”
Without any objections to Tesla’s request filed, the U.S. Commerce Department concluded that the precise aluminum product Tesla is importing “is not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.” So, it granted the waiver.
Tesla hasn’t always been so lucky to avoid tariffs, however. Last year, Tesla tried and failed to avoid 25% tariffs on a computer component imported from China that the automakers uses in its Autopilot system.
“Our costs for producing our vehicles in the U.S. have also been affected by import duties on certain components sourced from China,” Tesla argued in an attempt to be exempted from the costly tariffs.
Despite the rationale, that request was denied.
It will be interesting to watch how long the trade war lasts, as U.S. automakers and brands begin to suffer losses. Most notably, Ford publicized that it has lost $1 billion because of the Trump Administration’s tariffs.
While a company like Ford might be able to weather the financial impact of prolonged tariffs, a smaller, leaner and far less profitable company like Tesla will have a much harder time keeping afloat under the current scheme.
After all, Tesla is already is under extreme financial pressure, which has forced CEO Elon Musk to reportedly personally review every tenth expense report that goes through the company’s accounting department. This presumably in order to weed out unnecessary expenses.
Companies may be able to move production of some automotive components to the U.S. However, in doing so, they may become less competitive on the global market. Manufacturing is more costly in America. And if brands increase their production costs and thereby raise prices for consumers, they could be priced out of other non-U.S. consumer markets.