Air Freight News

Mercedes S-Class, Porsche stand to lose most in China tariff row

The European Union’s probe into Beijing’s electric-vehicle subsidies is meant to protect its carmakers from a flood of cheap Chinese cars. But if it leads to tit-for-tat tariffs, Mercedes-Benz Group AG and BMW AG’s biggest moneymakers will be most exposed.

For Germany’s high-end manufacturers, including Porsche AG, China has proven an insatiable market for their most expensive models, like the S-Class, 7-Series and Cayenne SUV. Those vehicles, however, are mainly imported, putting them in the line of fire if Beijing retaliates against any EU measures. 

“Those who live in glass houses shouldn’t throw stones,” Bernstein analysts Daniel Roeska and Eunice Lee said in a research note. The three German luxury-carmakers are at greatest risk of taking a big hit should the trade dispute escalate, they said.

China is the biggest destination for Germany’s most expensive vehicles. Last year, the country accounted for more than a third of global sales of BMW’s 7-series and Mercedes’ S-Class. The 1.47 million yuan ($201,000) Maybach ships more than 1,000 times a month from Chinese showrooms. 

For Volkswagen AG subsidiary Audi, China made up more than a third of global sales. Last year, the carmaker exported to China more than 10,000 of its A8 luxury sedans, which are made exclusively in Neckersulm, Germany.

Roeska and Lee estimate that Chinese revenue streams represent more than 25% of the German automakers’ underlying net income.

For some higher-volume models like smaller and mid-sized sedans, BMW and Mercedes have local manufacturing partnerships that allow them to sell those cars without the current 15% import tariff. But their high-end models are generally produced in Europe and North America.

Mercedes sold more than 750,000 cars in China last year, of which just over 20% were imported. BMW’s shipped in about a third of Chinese deliveries while Porsche doesn’t make any cars in the world’s biggest car market. 

The exposure has only increased in recent years as the carmakers, faced with supply chain logjams, focused resources on making and selling their highest margin vehicles. Under Chief Executive Officer Ola Källenius, Mercedes has been pursuing a luxury-first strategy, partly modeled on the company’s sales profile in China.

The EU’s chief trade negotiator Valdis Dombrovskis reaffirmed the bloc’s “more assertive” stance on trade with China in a speech in Beijing on Monday. 

If China decides to respond with import tariffs, “Made in Germany” — long considered a badge of sophistication — could prove a drawback.

Bloomberg
Bloomberg

{afn_job_title}

© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

Similar Stories

https://www.ajot.com/images/uploads/article/Okonjo-Iweala_1.jpg
Trade must move up global climate change agenda, WTO chief says
View Article
US sets limits on Chinese content to receive EV tax credits

The Biden administration released long-awaited rules designed to block electric-vehicle manufacturers from sourcing battery materials from China and other foreign adversaries, while giving automakers some flexibility to comply with the…

View Article
https://www.ajot.com/images/uploads/article/tanker_2.jpg
US sanctions three more shippers over Russian oil price cap violations
View Article
Macron concerns derail EU-South America trade deal yet again

(Bloomberg) -- A major trade deal between the European Union and South American economies received a serious setback after French President Emmanuel Macron said that the environmental concessions obtained by…

View Article
Turkey’s trade deficit narrows as imports fall on weak demand

Turkey’s trade deficit narrowed yet again in November, propelled by a drop in imports and a rise in exports for the fifth consecutive month.

View Article
Asia cheers Biden-Xi meet but wants more US trade, official says

Asian nations eager for the US and China to get along were pleased that Presidents Joe Biden and Xi Jinping met face-to-face last month, but still want deeper trade relations…

View Article