Friday, July 11, 2014

Tesla Motors: China Tax Break ‘Significant Additional Stimulus,’ Deutsche Bank Says

Deutsche Bank’s Rod Lache and team assess the impact of China’s decision to waive a 10% purchase tax for electric vehicles on Tesla Motors (TSLA):


Since the auto purchase tax rate is equivalent to 10% of a car’s price (excluding the 17% value-added tax), this represents a significant additional stimulus for Tesla demand in the world's largest Auto market. Recent data points have suggested that China demand for Tesla's Model S has been exceedingly strong. During recent meetings with Tesla management, we confirmed that wait times for the Model S have been rising (now 4 months in the U.S. and Europe, and 6 months in China), despite the sequential ramp-up in production. The China wait time is noteworthy, and we've seen indications that Tesla has been rapidly ramping up deliveries to this market…

Although Tesla's are priced somewhat higher in China than in the U.S., the difference is entirely due to taxes and shipping (the vehicle starts at $83,600 including $3,600 shipping; VAT adds another $17,700; Customs, duties, and other taxes amount to approx. $10,000 (down from $19,000 previously)). Nonetheless, given significantly higher markups for other luxury brands, the purchase price of a Tesla is somewhat lower than for a Mercedes E class or BMW 7 Series (In the U.S. the Model S is priced closer to S Class and 7 Series).

Shares of Tesla fell 1.6% to $219.46 today.

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