Automotive News Europe — 2024-11-06
Automotive Industry
BMW CEO Oliver Zipse said potential import tariffs under the US presidency of Donald Trump may benefit the automaker, even as shares in the German premium carmaker and its rivals fell due to concerns the sector would be hurt by escalating trade disputes.
Fears over import tariffs, which Trump has threatened on goods from the European Union, caused shares in BMW, Volkswagen, Mercedes-Benz and Porsche to fall 5.2% to 7.7%. Shares in Porsche, which has no production facilities in the US, hit their lowest level since its initial public offering in September 2022.
Zipse sought to allay fears after presenting bleak third-quarter results on 6 November 2024, pointing to the company’s strong US footprint that includes its largest plant worldwide.
The US market accounted for 12.9% of the 3.1 m in German passenger car exports in 2023, making it the single-biggest export market for Germany’s carmakers. The US is increasingly lucrative for German automakers because of robust demand for large SUVs and a slower shift to EVs than in Europe, allowing them to sell more of their higher-margin combustion-engine models.
Goldman Sachs reckons that if the U.S. were to increase tariffs by 7.5% to 17.5%, “we see the largest headwind to EBIT at Volvo Cars, followed by Mercedes, Porsche, BMW and VW.”
Trump’s election victory “marks the beginning of the most difficult economic moment” in Germany’s post-war history, said Moritz Schularick, president of the Kiel Institute for the World Economy. “The country now faces massive foreign trade and security policy challenges for which we are not prepared.”
During his campaign, Trump had said he plans to impose duties on foreign-made cars shipped to the US to protect local jobs. A trade conflict with Washington would create yet another problem for the German manufacturers, which are already facing tough competition in China and muted demand in Europe.
“I want German car companies to become American car companies,” Trump said during a speech in Savannah, Georgia in September. “I want them to build their plants here.”
BMW, VW, Mercedes production in US
Most of them already have. German automakers operate several factories in the US where they build cars both for local buyers and for export — meaning any European countermeasures could increase the fallout from a trade spat
BMW’s plant in Spartanburg, South Carolina, produces more than 1,500 vehicles a day, making it the company’s biggest factory worldwide and a main exporter to markets including Germany, China and Britain.
Zipse said BMW may even have “more of an advantage” if there were tariffs “because we have a very, very large footprint in the USA.”
“In this respect, we shouldn’t be too nervous about what might happen,” Zipse said, adding BMW was present at 30 locations across 12 US states.
He said that two-thirds of BMW’s vehicle sales in the US were produced in Spartanburg, and that BMW was committed to investing further in the site with its more than 11,000 employees.
In the first nine months, BMW’s US deliveries were down 2.1% at 271,399 vehicles.
The Spartanburg plant alone produced 410,793 vehicles in 2023, of which more than half were exported to 120 countries, leaving ample room for BMW to sell more locally should tariffs be slapped on vehicle imports.
“There’s some natural cover-up against possible tariffs,” Zipse said.
Volkswagen built around 175,000 cars at its plant in Chattanooga, Tennessee last year, including the Atlas midsize crossover and ID4 electric crossover. The company says it has invested more than $4.3 bn in the site since 2009.
Mercedes has two production plants in the US - in Tuscaloosa, Alabama; and Charleston, South Carolina - which between them produced 346,600 vehicles last year, around 14% of the automaker’s total sales. About two-thirds of the Tuscaloosa plant’s output is exported.
Trump favors tariffs on EU, Mexico, China imports
Analysts said potential tariffs on exports to the US will add to problems for automakers already facing tough competition in China and muted demand in Europe.
Nicolas Forest, chief investment officer at Candriam, said: “Trump could implement tariffs through executive orders, so for German carmakers or French luxury groups, everything Europe exports, it’s a risk.”
Juergen Molnar, investment strategist at brokerage RoboMarkets, said the punitive tariffs threatened by Trump “are likely to become a further negative factor on the already long list of car manufacturers.”
Trump has floated the idea of a 10% or more tariff on all goods imported into the US, a move he says would eliminate the trade deficit.
He has also said he should have the authority to set higher tariffs on countries that have put tariffs on US imports. He has threatened to impose a 200% tariff on some imported cars, saying he is determined in particular to keep cars from Mexico from coming into the country.
But he has also suggested that allies such as the European Union could see higher duties on their goods.
Trump has targeted China in particular. He proposes phasing out Chinese imports of goods such as electronics, steel and pharmaceuticals over four years. He seeks to prohibit Chinese companies from owning US real estate and infrastructure in the energy and tech sectors.
Trump has said “tariff” is his favorite word and views them as revenue generators that would help fill government coffers.