Tesla need not worry about the storm of fees that will come after the imposition of taxes on imports by Donald Trump at the U.S. border. This is because the EV firm assembles all its vehicles at its factory in Fremont, California, and thus, it is believed to be in the best position to bear the atrocities of tax.
It’s only a guess for now
In a new report Baum and Associates predicts that Elon Musk’s electric car company will not be required to raise the prices of its vehicles much. But this is a mere guess, as Tesla is a relatively new company, warns Alan Baum. The report is an effort to estimate the actual impact that a border tax can/will have on the auto industry.
Baum told Inverse, “We actually don’t have a full understanding there. We don’t know for example the part content of Tesla from overseas… because it’s a new company, we kind of punted on that. There’s less data available.”
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The report says that Tesla will largely remain unaffected. Baum, however, clarified that the reason for this prediction is that it is not sure how many parts Tesla imports and not because it thinks that a border tax will leave the company unscathed.
The study’s basic assumptions, according to Baum, were that the corporate income tax will be dropped to 20% and that the import tax of 20% will be levied on companies. This system would be beneficial to companies that make cars in the U.S. It means the cost of cars made by Ford would go up by just $282, while those manufactured by Volkswagen could go up by $6,779, notes Inverse.
How could Tesla benefit?
Tesla has earned a reputation for using fewer third-party components than other automakers. Also it is working on building a Gigafactory to produce batteries, which it buys from elsewhere currently. So this will work in its favor when the border tax is implemented.
Another thing that can go in its favor is that Trump’s Economic Advisory Forum has both GM CEO Mary Barra and Tesla CEO Elon Musk as members. This forum gives input on trade and taxation policy. Manufacturing cars will become much more expensive for GM with the imposition of a border tax, but the company is bound to benefit overall from a border-adjusted tax policy, says BGR.
On Monday, Tesla shares closed up 2.56% at $257.77. Year to date, the stock is up almost 21%, while in the last year, it is up almost 59%.