Tesla rolls out Model 3 in China ahead of schedule in sales push

By Brenda Goh and Yilei Sun
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Tesla Model 3 car leaves a cargo vessel at a port in Shanghai

A Tesla Model 3 car leaves a cargo vessel at a port in Shanghai, China February 22, 2019. REUTERS/Stringer

By Brenda Goh and Yilei Sun

BEIJING/SHANGHAI (Reuters) - Tesla Inc has started delivering Model 3 cars in China slightly ahead of schedule, as it looks to revive its sales that have been hit hard by Sino-U.S. trade tensions.

The California-based firm has already adjusted prices and added a cheaper Model 3 variant to its line-up to make its U.S.-made cars more affordable in China amid high import tariffs.

The U.S. luxury electric vehicle said in a statement that it held a delivery event in Beijing on Friday which "marked a significant milestone for the market".

It had initially projected a March start for Model 3 deliveries in China - the world's biggest auto market where overall car sales contracted in 2018 for the first time in more than two decades.

The initial deliveries will go to customers who placed their orders before the end of 2018, Tesla said. Buyers that ordered this year will start receiving their cars from end-March.

"I see its earlier-than-expected delivery as an effort to try and seize the market as quickly as possible" amid mounting competition, said Alan Kang, an analyst at LMC Automotive.

"Many of its potential customers will not only be considering Tesla's Model 3 but also other electric car models like Jaguar's I-PACE or that from Audi and Mercedes-Benz," the Shanghai-based analyst added.

While auto sales in China have waned as the economy slowed, Tesla's business was hit hard after Beijing raised tariffs on U.S. auto imports to 40 percent in July amid the trade tensions. China has since temporarily suspended the additional 25 percent tariff, reducing it to the 15 percent level.

Tesla currently imports all the cars it sells in China, but is in the process of building a factory in Shanghai that will manufacture Model 3 cars in the initial phase and help it minimize the impact of the trade war.

The United States and China are in the midst of talks aimed at resolving their trade dispute. If the two sides fail to reach an agreement by March 1, U.S. tariffs on $200 billion worth of Chinese imports are set to spike to 25 percent from 10 percent.

Tit-for-tat tariffs between the world's two top economies have upended international trade flows.

Tesla's earlier-than-scheduled delivery, however, comes as the automaker was dealt a setback on Thursday after Consumer Reports, an influential U.S. magazine, withdrew its endorsement for Model 3, citing reliability problems.

The magazine's decision to withdraw its endorsement, less than nine months after recommending the electric sedan, raised questions about quality that Tesla has faced since the Model 3's difficult launch.

(Reporting by Yilei Sun and Brenda Goh; Editing by Himani Sarkar)