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BMW will be the first major automaker to raise prices for US cars exported to China as the global trade war hits consumers.
The German luxury car manufacturer reacts to higher tariffs imposed by Beijing against retaliatory measures by President Donald Trump against imported Chinese goods.
BMW is the largest US vehicle exporter to China in Spartanburg, North Carolina ̵
The only other carmaker to have raised prices in China so far is Tesla. The electronics pioneer said he would raise prices for his S and X models this month by about 20 percent – between $ 22,600 and $ 37,600 per car – due to tariff increases.
Beijing cut global vehicle import tariffs from 25 to 15 Just a few days later, on July 1, customs increased to 15 to 40 percent when Trump raised import duties on Chinese goods worth $ 50 billion on the same day ,
BMW said the prices of the X4, another popular SUV produced primarily in the US, will "not be too concerned" because it will soon be producing the vehicle locally in China anyway.
"BMW stands for free trade, but can not stand still without taking action to respond to market changes," the group said in a statement.
Ironically, BMW and its main competitor, Daimler, are now at a disadvantage in selling cars to the largest market in the world because they have invested so much in US production in recent decades.
Corporations like Audi, Porsche and Maserati, which have no US plants and instead build their SUVs in Europe, can export to China at just 15 percent.
Jefferies analysts have labeled import tariffs "the biggest threat to industry profits" and warned that the cost to BMW and Daimler could be 4 to 5 percent of 2019 earnings.
Daimler has quoted the trade dispute with a profit warning at the end of June. Last Thursday, the group announced that net profits in the second quarter had fallen 27 percent to € 1.8 billion, a significant decline due to "temporarily weaker prices including tariffs".
Dieter Zetsche, CEO of Mercedes parent, told analysts on Thursday that if higher tariffs were to apply, the group would explore "alternative care scenarios," including "creating a new, full-fledged manufacturing facility in China." He noted that this might be too expensive, but the option has been evaluated.
Evercore ISI analysts predict that BMW's second-quarter earnings will fall from 2.93 billion euros a year ago to 2.67 billion euros.
So far, BMW has not changed the outlook for 2018 in the face of the China-US Tit-for Act. But in a wave of weak profits last week, General Motors, Ford, Nissan and Renault warned about raw material costs, Fiat Chrysler said customs tariffs in China had reduced demand, while Daimler said its pricing power was on Mercedes-Benz cars was hobbling