The looming threat of tariffs imposed by the U.S. administration is pushing European automakers to accelerate their production plans in North America. Volkswagen’s Audi, currently without a U.S. manufacturing base, will establish one in the region, focusing on models crucial for the American market. Mercedes-Benz, already producing in Tuscaloosa, Alabama, will further localize its output to mitigate the impact of escalating trade disputes.
These strategic shifts come as the automotive industry grapples with multiple challenges, including rising costs in European markets and fierce competition from China. U.S. tariffs on steel, aluminum, and the potential for levies on vehicles and semiconductors from Mexico, Canada, and other nations have added further pressure. The potential impact of these tariffs was a key topic of discussion when EU Trade Commissioner Maros Sefcovic recently met with U.S. officials and industry representatives in Brussels. While Sefcovic noted a willingness from both sides to potentially reduce tariffs, European automakers are proactively adapting their strategies.
Audi’s CEO confirmed the company’s intention to announce a specific North American production site this year. This move signifies a significant commitment to the U.S. market and a direct response to the uncertain trade environment. Concurrently, Mercedes-Benz CFO Harald Wilhelm revealed plans to expand production at its Alabama facility, aiming to shift production of high-end vehicles and sedans currently exported from Europe.
The imbalance in transatlantic automotive trade underscores the vulnerability of European manufacturers. In 2018, Europe exported approximately 800,000 vehicles to the U.S., dwarfing the roughly 200,000 vehicles shipped in the opposite direction. Furthermore, a significant portion of U.S. car exports originate from European brands’ American factories, subjecting them to the EU’s 10% import tariff. BMW, with its South Carolina plant exporting around 90,000 cars annually to Europe, exemplifies this complex dynamic.
German automakers, comprising 73% of the EU’s car exports to the U.S., are particularly exposed. As Allianz Trade auto industry expert Guillaume Dejean observed, “No matter which screw in the trade war is turned, German carmakers are almost always the losers.” While established U.S. production provides some flexibility for BMW and Mercedes-Benz, the ongoing trade tensions necessitate further adjustments to safeguard their market share and profitability. BMW, citing its significant U.S. presence and strong relationships with South Carolina officials, has indicated it doesn’t currently see the need to negotiate tariff exemptions.
In conclusion, the escalating trade tensions between the U.S. and Europe have spurred European automakers to accelerate their North American production plans. Audi’s commitment to establishing a new U.S. factory and Mercedes-Benz’s expansion in Alabama reflect a proactive approach to mitigating the potential impact of tariffs. These strategic moves underscore the evolving landscape of the global automotive industry and the challenges posed by protectionist trade policies. The long-term effects of these trade disputes remain uncertain, but European automakers are clearly taking steps to adapt and secure their position in the crucial North American market.
