Tesla will have trouble innovating its way out of this one.
The car manufacturer is facing potentially serious financial headwinds in its attempt to equip all newly produced vehicles with the technology required to enable full self-driving. So reports TechCrunch, which notes that the White House will not require a 25 percent tariff on the Chinese-assembled 'engine control unit' the cars require. Notably, this tariff would apply to the entire car – just the ECU.
The so-called Autopilot ECU is assembled in Shanghai, and that is the White House. Tesla officially requested a tariff exemption on the unit in question, but that request was denied on March 15. The rejection was not previously reported before this week. [After] careful consideration, your request was denied because the request The product is manufactured strategically important or related to 'Made in China 2025' or other Chinese industrial programs, 'reads the rejection letter signed by United States Trade Representative General Counsel Stephen P. Vaughn.
The' Made in China 2025 'program, which the Wall Street Journal notes is no longer actually referred to by that name in China, is the country's attempt to boost specific economic sectors. It has frustrated US officials, which the Journal reports call it a subsidy program.
So what does that mean for Tesla – both the company and customers hoping to embrace the self-driving future? Likely a more expensive ride, for one thing.
"This module is the brain of the vehicle," Tesla wrote in its now-rejected application for tariff exemption. "The imposed tariffs are for us to either source and new supplier, pass the cost increase to the end customer, or reduce operational costs within our internal operations, all having a reverse impact for what it believes to be the intention of the tariff."
According to Tesla, a new supplier is essentially out of the question.
"For a product as safety critical to consumers, and critical to the essence of Tesla, we turned to industry experts who could achieve this quality and complexity in addition to the deadlines, which was not possible outside of China," the company wrote in the aforementioned application. "Choosing any other supplier would have delayed the program by 18 months with clean room setup, line validation, and staff training."
In other words, it looks like the production – and cost – of self-driving Teslas is about to get a even pricier.