China will exempt Tesla's electric vehicles (EVs) from its vehicle purchase tax, China's Ministry of Industry and Information Technology (MIIT) said on August 30, amongst an escalating trade tension with the United State.

The exemption from a 10% vehicle purchase tax will lower the cost of buying a Tesla EV by up to roughly RMB99,000, the U.S.-based startup said via its WeChat account immediately after the ministry's announcement was released. 

Tesla's entire lineup for Chinese market—a total of 16 variants covering the Model S, X and 3—has been listed on the Catalogue of NEV Models Exempt from Vehicle Purchase Tax (26th Batch) released by the MIIT.

Right before the issuance of the MIIT's document, Reuters reported that Tesla would raise prices in China on August 30, ahead of schedule, and was considering rising prices again in December if Chinese tariff on U.S.-made vehicles was implemented. 

Reason for the tax exemption has not been given yet, while it is evident that Tesla is speeding up the landing of local production in China.

On August 7, Tesla China officially announced via its Sina Weibo account, a hugely popular microblogging site, that the Gigafactory 3 was expected to start production at the end of 2019, only seven months after its groundbreaking.

The Tesla's Shanghai-based plant, integrating functions of R&D, manufacturing and sales, is likely to produce about 3,000 Model 3 vehicles a week in an initial phase, before ramping up output to around 9,600 units a week – 500,000 units per year — when it becomes fully operational.

Including Tesla's models, there are a total of 399 NEV models exempted from the vehicle purchase tax, according to the latest catalogue. Besides, 324 NEV models are no longer applicable to the auto acquisition tax exemption.