Elon Musk is returning from China with a tax break for his electric car company.
Chinese authorities announced on Friday that Tesla has won an exemption from a 10% purchase tax, which will reduce the price that customers will have to pay for a Model 3, Model S or Model X.
Thirty-four carmakers were on the exemption list, which was released by the Ministry of Industry and Information Technology and State Taxation Administration. The list mainly applies to cars made by joint ventures between Chinese and foreign companies, like Daimler and Toyota. Tesla is the only foreign manufacturer being granted an exemption on its own.
The exemption is designed to benefit companies that make cars using new forms of energy, like electric vehicles. It applies both to cars made in China, as well as imported ones.
The tax break was announced the same day Musk met with Chinese Transport Minister Li Xiaopeng, according to a statement posted on social media by the Transport Ministry.
The deal is significant in part because of how the US-China trade war has escalated. Beijing announced last month that it plans to resume tariffs of 25% on US imports of automobiles and 5% automobile parts in December.
While Tesla has plans for a major facility in China, it still relies on its main plant in Fremont, California to produce vehicles for the world’s biggest car market. In the past, the company has slashed its prices to absorb the cost of Chinese tariffs.
The carmaker has ambitious plans for China. A new manufacturing plant in Shanghai — Tesla’s Gigafactory — has been under construction since the start of the year. It’s the company’s first factory outside the United States. It’s also the first time China has let a foreign automaker open a plant in the country without a local partner.
Musk told analysts on a July earnings call that he expects the long-term demand for the Model 3 at that factory to be about 5,000 units per week. The Model 3 is Tesla’s best-selling car.
Speaking at a conference in Shanghai with Alibaba chairman Jack Ma on Thursday, Musk said he was in town to visit the factory and was impressed by the progress he’d seen so far.
Tesla’s China team has done a “mind-blowing” job, Musk said. “I’ve never seen anything built so fast in my life before, to be totally frank. And I’ve seen some crazy things … I really think China is the future.”
