Andrew McCathie -
The German car industry has emerged as an early victim of the global trade conflict unleashed by US President Donald Trump’s protectionist America First plan, with BMW becoming the latest automaker to be hit by the tensions.
Munich-based BMW reported on Thursday a 6.3 per cent drop in second-quarter earnings before interest, taxes and appreciation(EBIT) to 2.75 billion euros ($3.2 billion), compared with the same period last year, along with a drop in sales.
The slump in earnings came amid price pressures for the cars it sells in China following the escalating trade conflict between the US and Beijing.
BMW was also the last of the big three German auto groups to post its latest quarterly profits.
Last week, BMW’s arch rival Daimler also reported a slump in second-quarter profit and revenue, saying its “Mercedes-Benz Cars division was not able to achieve its earnings of the prior-year quarter due to a temporarily weaker pricing including tariffs.”
“Protectionist tendencies are escalating worldwide,” Volkswagen chief executive Herbert Diess said on Wednesday with the group also battling to adapt to a new anti-pollution testing system in the wake of the diesel emissions scandal.
“Growing protectionism also poses major challenges for the globally integrated automotive industry,” Diess said, with Trump having taken aim at the German carmakers as part of his push to cut with the US trade deficit with the European Union.
German manufacturers account for only 8 per cent of the US car market, but have invested a total of about 33 billion euros in the American auto sector.
At the same time, they forged 118,000 jobs in the US, and last year exported 804,000 vehicles from their plants across the world’s biggest economy. BMW is now also the United State’s biggest car exporter.
The German car makers breathed a sigh of relief last month when Trump agreed to put on hold his threat of imposing a 25 per cent tariff on the EU auto imports at a meeting with European Commission President Jean-Claude Juncker, so the US and EU could consider a new business deal.
But the German Chamber of Commerce (DIHK) warned in a note to its members on Thursday: “Should these duties come, this could represent additional burdens of billions for the German economy.”
Global share markets slumped sharply again on Thursday after Trump warned Beijing that he was considering stepping up further tariffs on imports from China, which is the world’s second biggest economy.
Helping spearhead the falls in stocks across Europe were drops in shares in the German auto sector, as signs emerged of the hefty costs it faces from Trump’s plans to force China to “play fair.”
China responded in July to tariffs already imposed on its goods by slapping duties on US car imports, which in turn, have hit BMW imports to China from its plant in South Carolina.
BMW vehicle sales in China slowed to an increase of just 2.2 per cent in the first half of this year, compared with a jump of more than 18 per cent in the same period a year ago, the company said.
Despite the intense competition with China’s luxury auto market, both BMW and Daimler have been forced to raise the prices of some of their US-made sport utility vehicles sold in China after Beijing ramped up the duty on US vehicles from 15 per cent to 40 per cent.
But highlighting how the German carmakers are being squeezed by the current trade tensions, BMW said its customers in China have also demanded price cuts, following Beijing’s announcement in May that it was lowering import tariffs for cars from the EU from 25 per cent to15 per cent.
“We are consistently preparing ourselves to meet the demands of tomorrow,” said BMW chief executive Harald Krueger, adding that it was “all the more important during challenging times.” — dpa
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