China will exempt Tesla cars from purchase tax

China will exempt Tesla Inc’s electric vehicles from its purchase tax, the Ministry of Industry and Information Technology (MIIT) said on Friday, a concession made amidst on-going trade tensions with the United States.

Tesla sees China as one of its most important, growing markets and the exemption from a 10 percent purchase tax could reduce the cost of buying a Tesla by up to 99,000 yuan ($13,957.82), according to a post on the company’s social media WeChat account.

Sixteen variants – all of the Tesla models sold in the country – are listed on a document issued by MIIT on its website, including Model S, X and 3.

No reason was given for the decision to exclude the cars from the tax, but it comes as Tesla is expanding in China with a new factory and visits by Chief Executive Officer Elon Musk.

The Tesla plant in Shanghai will be the company’s first overseas factory and it is gearing up for a major Chinese sales push by promoting racing events, showroom parties with DJs and a line of Chinese Tesla stickers for chat apps.

Musk has met some of China’s senior leaders including Vice President Wang Qishan and the transportation minister.

He also has publicly praised the country amid trade tensions with the US, thanking the Shanghai and national governments for support, calling national leaders “very thoughtful” and describing China’s “amazing” progress in sustainable energy, transport, and space.

“This year, they did more orbital launches than the USA for the first time,” Musk, who also is the chief executive of rocket maker SpaceX, tweeted in December.

“It is pretty clear Tesla is committed to China, with the investment in the Shanghai Gigafactory. Those relationships probably helped Tesla lobby for a successful exemption from the tax,” Roth Capital analyst Craig Irwin said.

“Now, we need to closely watch the build out of the Shanghai Gigafactory and Model 3 volume ramp in China,” Irwin added.

Tesla did not respond to a Reuters News Agency request for comment.

While the company does not disclose sales by country, consultancy firm LMC Automotive estimates sales of 23,678 Tesla vehicles in China in the first seven months this year, nearly double the number of cars it sold a year earlier.