Tariff hikes bite BMW and Daimler in China

BMW and Daimler are facing more pain in China as higher tariffs on imported US cars force price hikes and consumers hold back on purchases.

BMW, which like Daimler ships US-made sport utility vehicles (SUVs) to China, said at the weekend it would join Tesla in raising prices in the Asian country. The steeper charges stem from China’s decision to boost tariffs to 40% on July 6, part of a tit-for-tat trade war with the US.

China almost simultaneously cut import duties for cars from everywhere else.

US car makers without China plants, such as Tesla, or those making US-China shipments, as well as importing a significant portion of their sales (Daimler, BMW, Fiat), are feeling the most pain from the new landscape.

Car makers have thus stepped up efforts to make more cars locally.

Tesla is looking to invest more in the world’s biggest car market with a planned factory near Shanghai. BMW is angling for majority control of its Chinese car venture, while Daimler has said it would consider assembly of cars from knock down kits, a common practice to avoid tariffs. If the trade war persists, car makers would change where they make vehicles, said John Zeng, Asia managing director of forecaster LMC Automotive, noting a BMW assembly facility in Thailand.

On Sunday, BMW said it would increase suggested retail prices for X5 and X6 models, built in Spartanburg, South Carolina, by 4%-7% in China. Tesla raised prices for its Model S and Model X earlier in July.

With the higher prices, an X5 sells for about the equivalent of $107,000 (R1.4m) in China, according to the firm’s Chinese website. Daimler, importing cars such as the GLE SUV from its Tuscaloosa plant in Alabama to China, did not comment.

Ford Motors, maker of Lincoln luxury vehicles, reiterated that it had no plans to increase the sticker prices on its import line-up in China.

The imbalances in tariffs prompted Daimler in June to warn of lower profits, moving first among major car makers. The company reported a 30% slump in earnings last week, led by losses at its Mercedes-Benz Cars unit. Like Fiat Chrysler, it partly blamed China consumers asking for price cuts even before a reduction in import duties to 15% from 25% from July 1.

Fiat, maker of the Jeep and Maserati brands, said sales in Asia contracted during the second quarter, even as it unveiled the Jeep Grand Commander, built in China specifically for that market. The downturn, even if temporary, prompted the Italian-American company to cut its annual financial target.

Daimler said it would consider assembly of cars from knock down kits