- Profits at Germany’s big automakers could be dramatically weakened if President-elect Trump applies new import tariffs.
- VW, BMW and Mercedes risk losing more than 10 percent of their operating profits, analysts told Handelsblatt.
- Audi and Porsche are in a perilous position because, unlike the other brands, they have no plant located within the US border.
It’s not only Chinese business bracing themselves for the fallout from any import tariffs Donald Trump might introduce during his presidency. German automakers should be prepared to lose more than 10 percent of their current operating profits, experts warn.
Although Trump hasn’t even taken office yet, let alone introduced any tariffs, he has talked seriously about doing just that, and foreign automakers can’t presume it’s an idle threat. German brands alone export 583,000 cars from Europe to the US every year and send 343,000 from Mexico, according to data from Marklines quoted in a Handelsblatt investigation.
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And because many of those almost 1 million vehicles have high prices, a steep increase in duty from the current 2.5 percent to something in the region of 12.5 percent could prove devastating. One analyst from investment bank Stifel Europe suggested German automakers could suffer a drop in profits of between 11 and 15 percent.
BMW remains outwardly positive about the future of its US sales operation, and it has reason to: like Mercedes and VW, it has the advantage of owning American production facilities. Although all three automakers still export thousands of cars to the US, they could ease back on those, and instead push their locally-made vehicles harder, or even rejig their production facilities to set up new production lines in their American factories.
But the outlook for other brands is less certain. Every single Porsche sold in the US is exported from Europe, and Audi’s best-selling model in America is the Mexico-built Q5, which accounts for a third of sales. Trump has such a problem with Mexico, he’s even suggested applying a 200 percent tariff on cars being shipped from there to America. BMW and VW also build cars in Mexico (as does Toyota, GM and Ford), but unlike those brands, Audi and Porsche don’t have a US plant.
As Handelsblatt notes, this US uncertainty couldn’t have come at a worse time. For years America and China have been the largest export markets for German-brand vehicles, and with China sales now on the skids, the last thing VW, BMW and Mercedes need is disruption in the US.
