Tesla hiked prices for its Model X and S cars by about 20 percent in China, becoming the first automaker to adapt its price policy in the world's largest automotive market in response to a severe US-China trade conflict.

The move is the first indication of how much higher Chinese tariffs on certain US imports will flow through to showroom floors, with other carmakers likely to follow suit or shift a greater portion of their production to China.

"It's only the first chapter of this story," said IHS Markit analyst James Chao. He said he expected more companies from around the world to be affected by the current trade skirmish.

On Monday, German automaker BMW said it was planning to raise prices on US-built SUVs for the Chinese market due to higher tariffs.

China slapped retaliatory tariffs on US car imports in response to the US administration's move to impose higher duties on $34 billion (€29 billion) worth of Chinese goods.

Affluent target group

For Tesla, which has been rapidly burning cash and struggling to turn a profit, China is key. Sales in the country accounted for about 17 percent of its revenue last year.

"Raising prices is going to hurt sales, but money-losing Tesla… can't afford to fully absorb the higher costs of the tariffs," CFRA research analyst Efraim Levy said.

Others believe the price hike will not bother the carmaker's affluent buyers. "Tesla consumers are a unique group of rich people," Automotive Foresight analyst Yale Zhang told Reuters.

"They want more of a brand image and product experience — price is less of a concern for them."

hg/jd (Reuters, FT)