BMW: High tariffs bring price hike and production shift

As the US and China fire tariff shots at each other, someone or the other keeps getting hit. This time, it’s BMW. The German carmaker said it will not only have to raise prices for its SUVs built in the US but it will also have to shift the production of some models outside the country due to the high tariffs imposed by China on the vehicles.

In retaliation to President Trump’s issuance of tariffs on Chinese goods, China has levied a 40% import tax on cars coming in from the US. BMW said it cannot entirely take in the tariff hikes. The company will have to increase its prices to maintain its momentum.

BMW said it will raise the prices of SUVs manufactured in the US to absorb the latest tariffs

On top of the price hike, BMW has decided to shift the production of some of its SUV models from the US to China due to the hike in tariffs. The automaker and its Chinese partner Brilliance Automotive Group have agreed to increase the vehicle production in the nation with an aim to reach 520,000 units by next year. The agreement hints at more investment and growth in China by the automaker including the development of electric vehicles.

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BMW is the largest auto exporter in the US and the company has 10,000 workers in its South Carolina plant where it manufactures many of its SUV models. The trade war is leading to automotive companies shifting production from the US and increasing prices for their products. Tesla (TSLA) increased the prices on some of its models by 20% this week.

This does not bode well for the US as the rising costs could hurt the car companies’ expansion and growth plans. The costs include the prices of components too which are also impacted by the trade war as some of these come from other countries. A timely resolution to the trade issues appears to be the need of the hour.