Tesla is considering raising prices of its electric cars in China, Reuters reported, citing people familiar with the matter. This change in prices will be implemented starting September, the sources said.

The news comes after China let Yuan slip below 7 per US dollar. Financial markets were disturbed when the Chinese currency dropped to 11-year minimum against the US dollar. The US government responded by saying that China is improperly manipulating the currency rates. The already tense situation between the US-China trade war is being further affected by Yuan’s rate drop.

Last week, US President Donald Trump threatened to impose tariffs on an additional $300 billion Chinese goods which he said would be effective from September. The drop in Yuan is supposed to be a consequence of the same.

Tesla’s price hikes are also an outcome of the sliding rates of Yuan as Tesla imports its electric vehicles in China. Thus, Tesla plans to cope with the slowdown of the Chinese economy by hiking prices to make profits.

The electric car-maker is investing $5 billion in the factory near Shanghai to manufacture and sell cars within the country itself. This would get rid of the import tariffs and shipping charges which would give the company better access to China’s domestic market.

China is the world’s largest electric vehicle market and Tesla’s second-largest market. That’s why the country’s market is crucial for Tesla’s growth outside of the US. Tesla said it aims to produce 500,000 per year in China by next year. Also, the company says it aims to roll-off Model 3 from 2020.

Tesla sold 1 million electric vehicles in China in 2017. In such an ever-growing electric market, Tesla will surely aim for making a profit and currently, the only way for it to make a profit in China is by increasing the prices of its cars.

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