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The European Union (EU) plans to sharply increase duties on imported Chinese electric cars on July 4. That tax increase also threatens to hit some Western manufacturers who make cars in China, including Tesla. Elon Musk's company says it will likely have to raise the price of the Model 3 if the higher import duties become a reality.

In the news: Tesla warns that higher import tariffs on Chinese electric cars could send the Model 3's price tag soaring.

  • "We will likely be forced to increase prices for Model 3 vehicles starting July 1," the US company announced in a press release. "This is due to additional import duties that will likely be imposed on electric vehicles manufactured in China and sold in the EU." Currently, Tesla is not sharing details on how steeply prices may rise.
  • The European Commission wants to take such action because Chinese producers have a competitive advantage over Western companies thanks to pervasive government support. The additional import duties are not yet 100 percent certain. Brussels first wants to hold talks with Beijing to find a solution to the trade dispute.

An individual tariff for Tesla

Details: The planned additional import duty, which could reach 38.1 percent, comes on top of the existing 10 percent tax.

  • While some (Chinese) producers of electric cars have already had specific duties imposed, for Tesla it remains unclear how high the import tariffs will be on the cars it makes in China and imports to the EU.
  • The European Commission said in advance that Tesla may receive "an individually calculated tariff at this stage."

Noted: Meanwhile, some companies that produce electric cars in China are starting to look for solutions.

  • Volvo announced earlier this week that it will move production of electric cars from China to Belgium in order to avoid paying (additional) import duties.

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