Car Industry

Tesla wins a tariff exemption on imported aluminum, for now

The exclusion is good for 10,000 tons of Japanese aluminum but is only valid for a year.

The battery packs used in Tesla require a significant amount of aluminum to produce, and sourcing that in the US hasn't been possible.

Tim Stevens/Roadshow

All the talk recently of the government imposing strict tariffs on imported goods from a whole host of countries has made the automotive world pretty dang nervous.

The tariffs would be a nightmare for anyone importing vehicles into the country, but it would also throw a big wrench in the works for companies producing vehicles and components domestically if they used raw materials from outside the US.

That's why the US deciding to waive tariffs on Japanese aluminum for Tesla is such a big win. The decision, which was reported by Reuters on Monday, means that materials costs won't be eating into the Big T's margins by a further 10%.

The tariff exclusion isn't just an excuse to import Japanese aluminum all willy-nilly though. There is a cap on it such that if Tesla exceeds 10,000 tons annually, it'll have to start paying again. That being said, we're struggling to think of a situation in which even Tesla would need more 20 million pounds of aluminum.

The other caveat is that the exclusion is only good for one year, so just because Tesla is living life footloose and tariff-free with its aluminum in 2019, doesn't guarantee that this will be the case next year.

Tesla submitted several other requests for tariff exemptions on vehicle components made in China -- specifically the Autopilot computer and vehicle control computer for Model 3 -- but those requests were denied.

Tesla didn't immediately respond to Roadshow's request for comment.

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