Car makers exporting to the US are waiting to see whether Donald Trump will convert his rhetoric on import tariffs into reality as they digest the news that the Republican has won a second term as president.
The US is a key market for premium and luxury UK car makers, with models from JLR, Bentley, Aston Martin, McLaren and Rolls-Royce comprising the bulk of the 73,571 UK car exports to the US last year.
JLR in particular is vulnerable to any potential tariff hike on European cars, given the US was the company’s biggest global market in the first nine months of the year, taking three out of every 10 cars the company sold. JLR said it wouldn’t comment on the issue.
Trump has railed against Europe and particularly its car exports in the run up to Tuesday’s election. "They don't take our cars. They don't take our farm products. They sell millions and millions of cars in the United States. No, no, no, they are going to have to pay a big price," Trump told a meeting of the Economic Club of Chicago in October. “To me, the most beautiful word in the dictionary is ‘tariff’.”
The UK could carve out its own relationship with the US when it comes to tariffs, but it would probably have to accept tougher terms in return for lower rates. “The UK may be forced to follow the US and increase tariffs on Chinese EVs,” said David Bailey, professor of Business Economics at Birmingham Business School.
Car makers like BMW, who have a manufacturing base in the US, are better placed. “If you are a local producer with a local footprint, you are of course benefiting in case there's something changing on the tariff side,” BMW CEO Oliver Zipse told analysts on the company’s earnings call today (Wednesday).
BMW builds SUVs including the X3 and X6 at its giant Spartanburg plant in South Carolina, satisfying 65% of its demand in the US, Zipse said. “That's a kind of a natural protection,” he said.
However, ZIpse also cautioned against reading too much into pre-election promises. “Let's not speculate whether there will be tariffs. It might also be that this is a verbal issue only,” he said.
Premium rivals Mercedes-Benz and Volvo also build cars in US plants, but Audi along with many volume brands are more exposed to a potential tariff-happy Trump presidency because of their manufacturing concerns in Mexico.
Mexico has become a key low-cost manufacturing location for US sales in a recent years, but the practice has come under attack from populist Republican firebrands for what they see as the theft of traditional US jobs. "All I'm doing is saying: 'I'll put 200[%] or 500[%], I don't care.' I'll put a number where they can't sell one car," Trump told Fox News during an interview in October.
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