Potential U.S. Tariffs on Automobiles Pose Significant Threat to German Manufacturers
The introduction of a 25% tariff on automobile imports by the U.S. administration could lead to substantial financial losses for leading German carmakers.
The U.S. administration has announced plans to implement a 25% tariff on automobile imports, a move that could have severe financial implications for German manufacturers, particularly Volkswagen, BMW, and Mercedes-Benz.
According to a recent analysis by Bernstein, these three companies could collectively lose approximately €11 billion as a result of the new tariffs, with projected profit margins decreasing notably—by two percentage points for BMW and 2.2 percentage points for Mercedes.
The United States represents a critical export market for Germany, the largest exporter of automobiles from the European Union (EU) to the U.S. In 2024, exports to the U.S. are projected to account for 13.1% of total German automobile exports, amounting to $34 billion.
In 2022, Volkswagen, Audi, and Porsche sold 655,000 vehicles in the U.S., while BMW sold 398,000 and Mercedes-Benz sold 325,000 vehicles.
Despite these significant sales numbers, the production share of these brands on U.S. soil remains limited—20% for VW/Audi/Porsche, 48% for BMW, and 35% for Mercedes.
Porsche faces particularly high risk due to its reliance on imports, as it lacks production capacity in the United States.
Meanwhile, both Volkswagen and Mercedes are reportedly not fully compliant with the United States-Mexico-Canada Agreement (USMCA), potentially exacerbating their exposure to tariff repercussions.
The USMCA allows exceptions from tariffs for components made within its member countries, but these provisions do not cover all models and manufacturers.
A consultancy firm, Kirn, estimates that the announced tariffs could jeopardize up to 30,000 jobs in the European automotive sector.
This comes at a time when the industry in Germany has already witnessed a loss of approximately 19,000 jobs in 2023, according to data from EY. Konstantin Gal, an expert at EY, has warned that the industry is experiencing a significant structural crisis, suggesting that the forthcoming changes could mark the beginning of a challenging period for employment.
While some German manufacturers have existing plants in the U.S.—with Volkswagen located in Tennessee, BMW in South Carolina, and Mercedes in Alabama—current production capacities in these facilities are still inadequate.
Shifting or expanding production involves complex and time-consuming processes, further complicated by challenges in other key markets such as China and transitions to electric vehicles.
Following the tariff announcement, the German Automotive Industry Association (VDA) has called for urgent negotiations between the European Union and the United States.
Hildegard Miler, the association's president, emphasized that the potential ramifications could threaten growth and prosperity on both sides of the Atlantic.
According to a recent analysis by Bernstein, these three companies could collectively lose approximately €11 billion as a result of the new tariffs, with projected profit margins decreasing notably—by two percentage points for BMW and 2.2 percentage points for Mercedes.
The United States represents a critical export market for Germany, the largest exporter of automobiles from the European Union (EU) to the U.S. In 2024, exports to the U.S. are projected to account for 13.1% of total German automobile exports, amounting to $34 billion.
In 2022, Volkswagen, Audi, and Porsche sold 655,000 vehicles in the U.S., while BMW sold 398,000 and Mercedes-Benz sold 325,000 vehicles.
Despite these significant sales numbers, the production share of these brands on U.S. soil remains limited—20% for VW/Audi/Porsche, 48% for BMW, and 35% for Mercedes.
Porsche faces particularly high risk due to its reliance on imports, as it lacks production capacity in the United States.
Meanwhile, both Volkswagen and Mercedes are reportedly not fully compliant with the United States-Mexico-Canada Agreement (USMCA), potentially exacerbating their exposure to tariff repercussions.
The USMCA allows exceptions from tariffs for components made within its member countries, but these provisions do not cover all models and manufacturers.
A consultancy firm, Kirn, estimates that the announced tariffs could jeopardize up to 30,000 jobs in the European automotive sector.
This comes at a time when the industry in Germany has already witnessed a loss of approximately 19,000 jobs in 2023, according to data from EY. Konstantin Gal, an expert at EY, has warned that the industry is experiencing a significant structural crisis, suggesting that the forthcoming changes could mark the beginning of a challenging period for employment.
While some German manufacturers have existing plants in the U.S.—with Volkswagen located in Tennessee, BMW in South Carolina, and Mercedes in Alabama—current production capacities in these facilities are still inadequate.
Shifting or expanding production involves complex and time-consuming processes, further complicated by challenges in other key markets such as China and transitions to electric vehicles.
Following the tariff announcement, the German Automotive Industry Association (VDA) has called for urgent negotiations between the European Union and the United States.
Hildegard Miler, the association's president, emphasized that the potential ramifications could threaten growth and prosperity on both sides of the Atlantic.
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