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Tesla Analysts Debate Chinese Tax Exemption: 'Small Victory' Or 'Pretty Big Deal'?

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Tesla Analysts Debate Chinese Tax Exemption: 'Small Victory' Or 'Pretty Big Deal'?

All Tesla Inc (NASDAQ: TSLA) cars sold in China won't be subject to a customary 10% purchase tax.

One Street analyst said on CNBC's "Squawk Box" that the tax win is merely a "small victory," while another said it's a "pretty big deal."

What Happened

Tesla will realize a "small boost" in sales in China from the 10% tax exemption, as any near-term benefits could be offset by the already announced auto tariff increase near the end of the year, Oppenheimer analyst Colin Rusch said Tuesday.

Tesla continues to ramp production in China. When cars are made in the country, they won't be subject to any foreign tariffs or taxes.

Progress in Tesla's manufacturing facilities in China looks to be on schedule, but 2020 will be an important year, the analyst said.

Tesla needs to ramp production and show some of the operating leverage the company has guided for, he said. 

Tesla Treated Like A Chinese Company

Tesla's financial benefits from avoiding a Chinese tax are likely to be minimal, Roth Capital Partners analyst Craig Irwin also said on "Squawk Box."

The Chinese government treating the U.S. company as if it is a "domestic Chinese automaker," the analyst said. 

Tesla is expected to generate $323 million a year in taxes to China after 2023, which implies a "fairly serious ramp" in production and sales, Irwin said.

Encouragingly, Musk has a reputation of living up to prior guidance metrics — although not necessarily "at the trajectory he wanted," he said. 

"I think we are probably going to see some success with a couple hundred thousand cars out over the few years," Irwin said.

"That would be a big deal."

Tesla shares were down 0.79% at $223.93 at the time of publication Tuesday. 

Related Links:

Tesla Raises Prices In China Ahead Of Tariff Increase

Tesla Analyst: Europe Business Steady, 'Demand Challenges Remain'

Photo courtesy of Tesla. 

Latest Ratings for TSLA

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Jul 2019ReiteratesUnderweight
Jul 2019MaintainsBuy
Jul 2019MaintainsNeutral

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