For the first time ever, Tesla cars have been included on the Chinese government's shopping list, according to reports from state media outlet Paper.cn. The move marks a significant milestone for the US electric carmaker in a country that is a key market for electric vehicles.

Tesla $TSLA-0.3% is the only foreign EV brand on the shopping catalog published by the government of Jiangsu province in eastern China. Other brands listed include Volvo, owned by Chinese company Geely, and state-owned SAIC.

The development means that government agencies and public organizations in the province can purchase Tesla cars as official vehicles, highlighting the close relationship between China and Elon Musk's company.

Public reaction and government response

The news spread quickly on Chinese social media, and some users began to question whether foreign cars should be used by the government. The Jiangsu provincial government sought to allay these concerns by declaring that the Tesla model was a "domestic car, not an imported one," according to a report by the state-run National Business Daily.

Tesla's production and market share in China

Tesla

TSLA

$227.20 -$0.67 -0.29%

Capital Structure

Market Cap

725.8B

Enterpr. Val.

729.1B

Valuation

P/E

63.8

P/S

7.7

Open $230.09

Day range $226.88 - $235.68

52 week range $138.80 - $273.93

Tesla, which has a huge gigafactory in Shanghai, produced about 947,000 cars in China in 2023, with most of them used in the domestic market. The Shanghai-built Model Y is listed in the Jiangsu province's shopping catalog at a price of 249,900 yuan ($34,377).

China has become a more important market for Tesla as the country accounts for more than half of total global EV sales. Last year, Tesla earned nearly a quarter of its total revenue from China. However, the U.S. manufacturer faces growing competition from Chinese rivals. BYD overtook Tesla in the final quarter of 2023 as the world's largest EV seller, but Tesla regained its position in the first half of this year, with the two companies now in a tight race.

Safety concerns

Previously, Tesla cars were banned from entering some government and military complexes in China due to concerns over espionage and data security. Those restrictions were lifted in April when a top automotive association announced that Tesla cars passed China's data security requirements. The announcement came on the same day Musk visited Beijing and met with Premier Li Qiang, who called Tesla a "successful model" for US-China cooperation.

Rising tensions

Despite this success for Tesla, tensions between China and the West are growing. State-owned Chinese carmaker SAIC faces additional 38.1% tariffs on its EV exports to the European Union. The European Commission confirmed on Friday that it will impose additional tariffs of up to 37.6% on EV imports from China. The tariffs were first announced in early June and are seen as a necessary move by the EU to stave off a flood of cheap Chinese cars that are built with "unfair" government support.

Tesla, as a major exporter of Chinese-built EVs to Europe, has requested separate tariff calculations by the Commission. The company currently faces an average additional tariff of 20.8% as part of a group of companies cooperating with the EU investigation.

Disclaimer: You will find a lot of inspiration on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.