BMW CEO Predicts US Tariffs on Foreign Cars Will Be Temporary
In a statement that has sent shares of the German carmaker soaring, BMW’s chief executive, Oliver Zipse, has predicted that the 25 per cent tariffs on imports of foreign cars imposed by the US administration will be "temporary" and lowered from July. The prediction comes following a meeting between BMW executives and the US administration, in which the company’s large production footprint in the US was seen as a key factor in negotiations.
According to The Financial Times, shares in BMW rose more than 4 per cent on Wednesday after the Munich-based carmaker reported stronger than expected quarterly earnings and maintained its full-year forecast that profits would broadly match last year’s. As the source reports, Zipse’s comments have provided a boost to the company’s stock, with investors optimistic about the potential for a reduction in tariffs.
The comments from Zipse are significant, as they mark a shift in sentiment from the US administration’s hardline stance on tariffs. As The Financial Times notes, US and foreign carmakers have lobbied the US government to allow them to offset import tariffs if they are also exporting vehicles from the country. The tariffs have had a devastating impact on the industry, with companies including Stellantis and Mercedes-Benz pulling their earnings guidance last month as they warned it was impossible to predict the effects of tariffs on supply chains and consumer demand.
As Zipse noted, BMW’s large production footprint in the US – it was the country’s top car exporter by value last year – would "have an effect" in negotiations with the Trump administration. "There are a lot of negotiations behind the scenes. And that leads to the assumption that [the tariffs] are rather temporary," he said. "We can see that our large footprint there will not be ignored." According to The Financial Times, Zipse was among German automotive executives who met Trump on April 18 to discuss new US levies.
The impact of the tariffs on the industry has been significant, with companies struggling to keep pace with the frequent changes. As The Financial Times reports, BMW’s chief financial officer Walter Mertl struck a more upbeat tone on Wednesday, saying that while the tariffs introduced in early March would have a "notable" impact on second-quarter results, the company expected its US business to grow. However, analyst at Citi cast doubt over BMW’s "optimistic sales growth expectation, especially in the light of continued China declines".
The premium carmaker has weathered the turbulence better than its Stuttgart-based rival Mercedes-Benz, which last month said first-quarter earnings before interest and taxes fell 41 per cent to €2.3bn. As The Financial Times notes, BMW said on Wednesday that its earnings before tax in the first quarter reached €3.1bn – down 25 per cent on the same period last year. Adjusted for currency fluctuations, revenues fell 9 per cent to €33.8bn, which the company mainly attributed to an increasingly competitive Chinese market.
Furthermore, as The Financial Times quotes, Zipse said that in terms of current "market distortions" the "higher tariffs are not caused by the US, but by the EU". The company added that the EU’s anti-subsidy tariff on Chinese electric vehicle imports had cut earnings by a "low three-digit million" euro amount, as the company now pays a 30 per cent duty on European sales of models such as the BMW iX3 SUV and the electric Mini Cooper, both produced in China.
In conclusion, Zipse’s comments have provided a boost to BMW’s stock, with investors optimistic about the potential for a reduction in tariffs. As The Financial Times reports, the company remains confident about its US business, despite the ongoing challenges posed by the tariffs. With the industry continuing to navigate the complexities of the US administration’s trade policies, Zipse’s prediction that the tariffs will be temporary will come as a welcome relief to investors and industry stakeholders alike.
