Tesla tariffs on Chinese parts to cost about $50 million in Q4

Tesla CEO Elon Musk.
Max
Whittaker/Getty Images

• Tesla said
  on Wednesday in its third-quarter earnings letter that it
  expects tariffs on parts made in China to cost around $50
  million during the fourth quarter of this year.
• The automaker said it expects gross margins on its
  Model S sedan and Model X SUV to fall slightly due to increased
  tariffs on Chinese parts.
• Gross margins for the Model 3 sedan should remain
  stable, Tesla
  said, due to manufacturing cost efficiencies and fixed cost
  absorption. 

Tesla said on Wednesday in its third-quarter earnings letter that
it expects tariffs on parts made in China to cost around $50
million during the fourth quarter of this year.

The automaker said it expects gross margins on its Model S sedan
and Model X SUV to fall slightly due to increased tariffs on
Chinese parts, which it said will not be completely offset by
cost efficiencies in its manufacturing process. Gross margins for
the Model 3 sedan should remain stable, Tesla said, due to
manufacturing cost efficiencies and fixed cost absorption. 

Model 3 gross margin exceeded 20% during the third quarter, while
the total gross margin for all of its vehicles neared 26%.

Tesla 
posted
 adjusted
earnings of $2.90 per share (compared to an analyst forecast of
-$0.15 per share) on $6.8 billion in revenue (compared to an
analyst forecast of $6.315 billion) during the third
quarter.

Other automakers, like BMW, Ford, and Honda, have said
tariffs on steel and aluminum imposed by President Donald Trump’s
administration have had a negative impact on their financial
performance. The Trump Administration announced tariffs on
foreign-made steel and aluminum in March, part of a series of
proposed and enacted tariffs that have resulted in retaliatory
measures from China and increased tensions between the US and
China.

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