BMW Group CEO Harald Krüger says the automaker fully intends on sicking with its current investment strategies in Mexico and the United States, even after President Donald Trump’s proposal to levy steep import taxes on vehicles brought into American borders.
“We need free world trade,” Krueger told the CAR Symposium automotive congress in Bochum, Germany, on Wednesday.
Earlier this year, BMW said it was going to complete construction of a billion-dollar factory in San Luis Potosi, Mexico, for the 3 Series — a vehicle that would be subject to Trump’s theoretical 20-percent tariff. It also plans to continue investing it its Spartanburg, South Carolina assembly plant. Spartanburg produces over 400,000 X3, X4, X5 and X6 crossovers annually and exports the majority out of the United States.
BMW is investing over one billion dollars to expand annual capacity in Spartanburg to 450,000 units and add the upcoming X7 SUV to its production lines.
While BMW is sticking to its guns at the moment, it has previously stated that it isn’t willing to roll with the punches. BMW brand’s board member for sales Ian Robertson told Automotive News Europe ,”If there was a real change in the tariff system, like there often is with changes in tariff systems around the world, we have the flexibility.”
All of Germany’s large automakers — Daimler AG, Volkswagen Group, and BMW — have made considerable investments in Mexico in recent years, as production costs are typically lower than in North America.
[Image: BMW] [Source: Reuters]
The tariff should be expensed to the manufacturer, not the customer. That way they will be punished for exporting American jobs to Weedexico. Of course I would never waste any money on a “B”reak “M”y “W”allet vehicle anyway!
Make Oldsmobile Great Again!
Expensing tariff to manufacturer instead of customer is just moving figures around on a sheet of paper. The customer ends up paying for the tariff no matter where in the loop bean counter counts it.
Cars sell for what the market will bear (price for the volume the OEM wishes to move) so the tariff comes out of the OEM. The price of Mexican built BMW will not increase by 20% if the tax goes up. BMW will make 20% less on each one. Not that they will be hurting considering the lower labor cost vs US or Germany.
All manufacturers will make 20% less on Mexican-assembled components, and they won’t pass-on the costs. Also, all consumers get a pony.
And if the tariff is 120%, BMW will just pay people to take their cars……
Back in the real world, if BMW faces 20% higher costs, they will increase prices by some amount less than 20%, and watch sales slide somewhat. So, BMWs get more expensive for consumers.
Faced with this, however slight, respite from competitive pressure, other makes will feel comfortable increasing their prices a bit, and decontenting a bit for the same price. Again, screwing the consumer.
There’s no magical new value added to the world by tax feeding leeches sticking their grubby paws into value chains that exists between producers and consumers of a good. The money taken by the tax feeders, come from somewhere. And that somewhere is proportioned by supply and demand curves. Neither of whom are 100% neither horizontal nor vertical.
And that’s just the first order effect. In the long run even more insidious, is the fact that the tax feeders are now more directly involved in picking competitive winners and losers. So, instead of investing more in auto plants, in the US as well as abroad, automakers will shift some of that investment towards lobbying firms, political donations and lawyers instead. Which is nice for those who write the laws, as the above reads like a listing of their job titles.
Of course, all of the above likely reads like little more than a great big Huh?! to the average well indoctrinated dittohead. Such is the power of public “education” for everyone.
Not a single senator or rep. from SC would vote for this tax, so it’s not going to happen. Nor will any Republican vote to penalize the big corporations from their states for operations overseas. Those corporations keep their reelection coffers stuffed and they keep their party afloat.
If they go with Trump on this, they slit their own throats.
If the government wants to create a revenue stream taxing well-off bimmer buyers, I’m sure BMW could care less. Their customers can afford it.
Good way to tax the wealthy. Especially if the tariff fees are used to promote domestic job creation somehow.
Of course, their SUV’s are all made locally already, aren’t they?
By the time BMW makes any real traction with Hecho en Mexico Trump will be gone. Even if if takes 4 years which I doubt it will. BMW will be just fine.
The US tariff will be offset by the lower cost of production in Mexico vs Germany. An those Mex made 3-series will be bought by non-discerning buyers at 2% discount vs Ger made. So Mexico strategy is sound. But, Krueger should be careful what he wishes for. It may just might come true. New Asian producers(ie Chinese) will take over the global auto markets. Just like Japanese/Taiwanese did in consumer electronics.
It’s interesting to see how the initial shock at Trumps actions becomes more and more palatable to liberal pundits and tv jockeys. The crying and freakouts are fading away. It’s a new normal. Deal with it. Good going!
Sceptic,
Hmmm?
So you believe in a reduction of living standards?
If Trump wants more manufacturing, manyfacturing cars and cast iron frying pans is not the way to go.
I would agree with Trump if the auto manufacturers wete encouraged to move to robotic manufacturing. Or better still Trump made an effort to encourage 3D printing manufacturing.
But horse shoe and car manufacturing is passe.
We are entering a new world and clinging onto the past is not the answer.
For your info, there are four major industrial robot manufacturers. Two in Japan; one in Germany and one in the US. Not good.
Encourage 3D printing manufacturing? What are you on today. 3D printing is the most expensive and least productive way to manufacture things in any sort of volume. Its value is in that it is the cheapest and quickest way to make one-off products and prototypes.
Scoutdude,
WTF?
You will find current 3D printing is at the same stage in developement as a 1000 year old treadle wood lathe.
From the wood lathe came metal working lathes, then CNC…..now robotic lathes.
Robotics are the answer to affordable and competitive manufacturing. You don’t require low skilled workers that are expensive and demanding. The jobs will be higher skilled.
Look at the agri industry, mundane work, controlled by OECD economies. The same can occur with manufacturing if the Luddites pull their heads in.
“The crying and freakouts are fading away.”
There’s this river in Egypt you should read up on…
Don’t waste your time, bunkie…to a “conservative” like this fool, any policy is just fine as long as it makes liberals mad.
People like this aren’t conservatives at all. They’re just trolls. So’s POTUS.
@FreedMike,
+1