Automotive News Europe — 2024-11-09
Automotive Industry
Donald Trump’s victory in the US presidential election brings risks for European automakers, especially for German brands that export large numbers of cars to the US, experts said.
Trump’s reelection to the White House is likely to lead to a more protectionist trade policy, with higher tariffs for cars imported from Europe.
“In any scenario you can think of, German automakers are going to be at the center of the storm, if you believe Trump’s rhetoric,” Jacob Kirkegaard, senior fellow at Bruegel and the Peterson Institute for International Economics, said. “German automakers are going to literally be in Trump’s bullseye — he is going to ‘end them,’ if you believe what he has historically said.”
In his first term, Trump had sought to impose a 25% tariff on cars imported from Europe.
Kirkegaard said that Republican majorities in the Senate and Congress — if current projections pan out -— are now made up of more legislators loyal to Trump rather than the party, and they may offer fewer guardrails to putting his protectionist campaign promises into practice, for example a 10% tariff on all non-US goods.
“We now have an extremely successful politician who has been elected overwhelmingly by the American public, and we should expect him to do what he says he is going to do,” Kirkegaard said.
In 2023, about 400,000 cars were exported from Germany to the US, and in the first half of 2024, the US was the largest buyer of German car exports, according to the German Association of the Automotive Industry, or VDA.
BMW, Mercedes could fall back on US plants
BMW is in a good position to weather any new tariffs because it produces about two-thirds of its US. sales volume in its assembly plant in Spartanburg, South Carolina, CEO Oliver Zipse said. Spartanburg is the automaker’s largest global plant, and also exports cars to the UK, China and Germany.
“If a new administration would impose additional tariffs, this local footprint would put us in a stronger position in comparison with some of our European competitors,” a BMW spokesperson said.
Mercedes-Benz also has a large assembly plant in the US, in Alabama. A spokesperson described Mercedes as an “integral part” of the American economy, with 11,300 employees in the country.
Ferrari and Lamborghini said they do not comment on election results.
ACEA, the European auto lobbying group, acknowledged a need for Germany and Europe to focus more on their own interests. “It is crucial that Germany and Europe position themselves in such a way that we are fundamentally safe, more independent and more resilient. We must therefore first and foremost do our own work – in all areas,” a spokesperson said.
German automakers could expand US production
German automakers could even expand their production in the US in response to tariffs, Stefan Bratzel, founder and executive director of the Center of Automotive Management, in Bergisch Gladbach, Germany, said, adding that Porsche or other luxury automakers “will probably find it more expensive.”
Mexico could also prove problematic as a production location. Trump has previously taken aim at Mexico-based car production, threatening a 200% tariff on Chinese EVs built in Mexico, although Chinese automakers have avoided the US market because of existing prohibitive tariffs.
Volkswagen, BMW and Audi have major production sites in Mexico, while Mercedes builds a smaller number of cars there in a joint venture with Nissan.
Gartner analyst Pedro Pacheco doesn’t predict many changes under Trump in terms of the import of Chinese cars, as the Biden administration was already protectionist in this regard. “Given that the only thing he cares about is jobs, Trump may actually be more open to Chinese investment in a plant [in the US], for example,” he said.
However, more stringent regulations against the use of Chinese technology in electric vehicles may lie ahead. This adds an additional risk for European car producers if their vehicles include Chinese technology.
Musk’s allegiance could shield EV incentives
The effects of a second Trump presidency on EV sales are unclear. He has targeted EV incentives put in place under the Biden administration, which could push automakers to build more internal combustion-based vehicles. That could affect Mercedes, for instance, which builds several full-electric models in its Alabama factory on dedicated platforms.
However, with Tesla CEO Elon Musk acting as one of Trump’s strongest allies during the electoral campaign, he may not take substantial steps against EVs.
At the end of the day, Gartner’s Pacheco said, European automakers should not spend too much time worrying about the election results. “European carmakers need to focus on the basics, namely product strength,” he said. “It is not about tariffs, but about the ability to put the most competitive products in the market.”