Tesla, the electric car maker owned by Elon Musk, has frozen new orders in China, amid an ongoing trade war initiated by President Donald Trump's reciprocal tariffs. The move came hours after Trump imposed 145 per cent tariffs on China, which reciprocated with 84 per cent duties on US imports.

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This is a clear indication that Musk's businesses are suffering, particularly as China is the largest market for Tesla outside of the US. Tesla is already facing boycotts, with several cars attacked across the US and Europe over Musk's association with Trump as the head of DOGE, or the Department of Government Efficiency.

 

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What did Tesla do about orders in China?

According to reports, Tesla will not initiate any new purchases for Model S and Model X cars, which are imported from the US. Orders will not be taken on Tesla's WeChat account.

These vehicles, built in the US, will likely face tariffs imposed by Beijing as countermeasures against Trump's reciprocal duties.

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Tesla's Model S and Model X are costlier than the Model 3 and Model Y cars which are manufactured inside China.

Model S and Model X sales were only 5 per cent of Tesla's total sales in China.

China imported 1,553 Model X cars and 311 Model S cars in 2024, said Li Yanwei, an analyst with the China Auto Dealers Association.

Why is China important for Musk?

China is the largest market for electric vehicles and is Tesla's largest market abroad, second only to its home country of US.

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Model 3 and Model Y cars are made at Tesla's plant in Shanghai and sold domestically in China, besides being exported globally to Europe and elsewhere. These models actually make up the bulk of Tesla's sales.

Musk has also kept good relations with China because of its dominance of lithium-ion batteries, the heart of electric vehicles.

Tesla has been doing well in China till the Trump tariff war hit

As of March this year, Tesla was third among electric carmakers in China. The number one is the Chinese BYD with 29.3  percent market share, while Tesla had 7.5 per cent.

In March, 74,127 Tesla vehicles were sold in China, which is an annual growth of nearly 19 per cent.

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In 2024, Tesla's sales in China went up to a record of 657,000 cars, which was up 8.8 per cent on year.

But homegrown EV vehicle brands are slowly eating into its market share.

Shenzhen-based BYD last year beat Musk on global revenues.

Musk is increasingly irritated by the tariff war 

Though Trump is his boss by way of him being also the leader of the federal agency DOGE, Musk has been increasingly restless about the tariff war.

The obvious reason is that countries where Musk exports Tesla could jack up tariffs for his cars.

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Musk recently described Peter Navarro, Trump's counsellor for trade and a key architect of the reciprocal tariffs, “dumber than a sack of bricks” and “truly a moron”.

Navarro, for his part, called Musk a more “car assembler” and not a manufacturer.

Musk has said that Tesla has been impacted by the tariffs, with the share price down 50 per cent from its lifetime-high in December.

Musk is also not pleased that Trump is having a similar reciprocal tariff war with European Union countries, another key market for his cars.

(With inputs from agencies)