German Automakers Push Back Trump’s Warning Over Mexican Plants

  • ‘Remains to be seen’ if Trump’s ideas become law, group says
  • Daimler, BMW also make cars in U.S. for global export

German carmakers pushed back Donald Trump’s threats of import duties on the autos they make in Mexico, pointing to extensive production expansion in the U.S. in recent years.

BMW AG, which the president-elect singled out in an interview with German newspaper Bild on Sunday, sought to defuse potential tensions by stating that its largest factory is in South Carolina and that cars made at a planned, smaller factory in Mexico will be exported globally. Trump said BMW will face a 35 percent import duty on vehicles it exports to the U.S. from Mexico.

“We take the comments seriously, but it remains to be seen if and how the announcements will be implemented by the U.S. administration,” Matthias Wissmann, president of German auto industry association VDA, said in an e-mailed statement. The U.S. Congress will probably show “substantial resistance” against the duty proposals, he said.

Trump’s comments were the first aimed at a European carmaker after he issued similar warnings to Ford Motor Co. and Toyota Motor Corp. So far, the threats have prompted conciliatory gestures by the targeted companies. Ford has canceled plans for a $1.6 billion factory in the country to instead expand an existing site in Michigan. Toyota, which is set to start producing Corolla cars at a new plant in Mexico starting in 2019, has said it’ll take Trump’s decisions into account in the future.

BMW shares fell as much as 2.7 percent and were 1.5 percent lower at 86.28 euros at 14:38 p.m. in Frankfurt trading. That’s in line with the Bloomberg Europe 500 Autos Index, which was down about 1.7 percent.

The company sees “no reason” to change its plans in Mexico, Peter Schwarzenbauer, who heads BMW’s Mini and Rolls-Royce brands as well as BMW’s car-sharing business, told reporters on the sidelines of a conference in Munich. “Trump’s comments aren’t really a surprise,” he added.

Export Powerhouse

BMW, which has been churning out autos at its plant in Spartanburg, South Carolina for more than two decades, plans to expand capacity there to 450,000 units annually from about 411,000 in 2016. The factory, which makes almost all of BMW’s SUVs sold worldwide, is one of the largest exporters of vehicles out of North America.

The U.S. is the second-largest export market for German automakers and an important production country. Mercedes-Benz and Volkswagen AG also have factories in the U.S. and more than half of the vehicles made by German companies there are exported. Representatives at Volkswagen and Mercedes parent Daimler AG declined to comment.

After being asked about BMW’s planned facility in central Mexico -- which is being built at a cost of $1 billion and will start making 3-Series sedans in 2019 -- Trump made his comments about the company.

“I would tell BMW, if they want to build a factory in Mexico and sell the cars in the U.S. without paying a 35 percent tax, then they can forget about it,” Trump said, according to Bild.

While Trump referred to BMW by name, it isn’t alone. Every German carmaker has or is building capacity in Mexico to supply the U.S. as well as South American markets -- and take advantage of low wages in the country.

Planned and Existing SitesMexicoU.S.

VW

460,000 annual capacity

Jetta, Beetle, Golf

150,000 annual capacity

Passat

Audi

150,000 annual capacity

Q5 SUV

No U.S. factories

Mercedes-Benz

230,000 annual capacity

Compact cars in joint venture with Nissan

300,000 annual capacity

GLE, C-Class

BMW

150,000 annual capacity

3-Series

450,000 annual capacity

X-Series SUV

Source: company data

The biggest German auto factory in Mexico is Volkswagen’s plant in Puebla, and Daimler plans to start making compact cars at a facility jointly operated with Nissan Motor Co. in Aguascalientes next year. Volkswagen’s Audi luxury unit is the most vulnerable to threats of import duties because it makes about 150,000 vehicles in Mexico annually but doesn’t have any U.S. facilities that it could use as a bargaining chip. BMW’s annual capacity of 150,000 deliveries out of Mexico is a small share of BMW’s 2 million car sales last year.

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