BMW, Daimler affected in US-China tariff standoff

Due to the rising trade tensions with the US, China has proposed a 25% tax on cars built in the United States. This will affect over 2,70,000 vehicles, most of which are manufactured by the German companies. In terms of monetary value, German carmakers account for US$ 7 billion of the US$ 11 billion total car exports from US.

BMW currently makes the X3, X4, X5, X6 and X7 SUVs at the Spartanburg plant in South Carolina. The company would be hit by US$ 965 million in tariffs, while rival Daimler would stand to lose US$ 765 million. Currently, BMW exports overs 18% its cars sold in China from the Spartanburg factory. Leading up to the trade standoff, the company has already moved the X3 production to a factory in Rosslyn, South Africa and one in Shenyang, China.

X3 sales used to account for over 35% of the company's total exports, which have since been moved out of the US. However, moving production from one place to another is expensive and requires months of planning and implementation. The Chinese regulators have also called for increasing local sourcing of auto ancillaries leading to more production being moved over to China. In addition to German brands, companies like Tesla and Ford have also been affected by the increased tariffs.

The Chinese government has further revealed that they would not hesitate to increase the import duty to 50% for cars and automobile parts as a tit-for-tat move against the US President's proposed levy on Chinese products.

Source - Reuters