5,741 Mustangs Sold

Why American cars don't sell in Germany (Hint: it's not tariffs)

Tempo 30 zur Luftreinhaltung auf Leipziger Straße 10 04 2018 Leipziger Strasse Berlin GER Tempo
Rarely seen in Germany. Source: Reuters

President Trump is right: Germany doesn’t import many American-made cars. But the reason is not what Trump believes — Europe’s relatively high tariffs on imported vehicles – but the continent’s preference for small, less polluting cars that don’t cost a fortune each time they visit the gasoline pump.

“Europe is a highly competitive and very special market, which is due to sophisticated customer requirements,” said Stefan Bratzel, a car expert with the University of Bergisch Gladbach. Especially in Germany, the market share of domestic and European manufacturers is very high, he said. In fact, US cars have only a 0.5 percent market share in Germany.

The US charges only 2.5 percent duty on imported brands like BMW, Mercedes Benz and Volkswagen, while Europe imposes a 10 percent duty on imports. But it’s not the price that really matters, but fundamental differences in taste: the three best-selling models in the US are pickup trucks from Ford, Chevrolet and Dodge. In Germany, there is not a single pickup among the 50 most popular models.

“In Germany, our own car companies are very strong.”

Andreas Hix, CEO of Autec

As opposed to the car market, the US is staunchly defending American manufacturers in the pickup segment – imported trucks are subject to a 25 percent tax, not the 2.5 percent levy on cars.

There are a few outliers in Europe: Ford has begun importing the Mustang to sell alongside cars it makes in Cologne, where it opened a factory in 1925. The American firm actually sold 5,741 new Mustangs in Germany last year.

The Chrysler subsidiary Jeep is benefiting from a global boom in off-road vehicles, but this is not reflected in the trade statistics because the best-selling Jeep model, the Compass, is made in Mexico, and the second best seller is the Renegade, which is made in Italy and is not really a Jeep at all, but is based on the Fiat 500X. Not a single Chrysler made in the US is sold in Europe anymore.

General Motors stopped the sale of Chevrolet in Europe in 2013, to give the local GM brand, Opel, a boost, but GM sold Opel to French automaker Peugeot last year. Now, if you want a GM car, you have to travel to Switzerland, where it sells a few hundred Corvettes, the muscle car, and luxury Cadillacs. Only a few are registered in Germany each year.

Mr. Trump’s pressure on Europe may yet succeed in lowering tariffs on imported cars; in fact, it has already succeeded in getting China to reduce import duties on American-made vehicles. By threatening to put duties on Europe’s steel and aluminum exports, the US may force European leaders to back down to avoid a trade war.

But that won’t mean that American cars sell like hotcakes in Germany, said Andreas Hix, head of the Frankfurt car dealership Autec, which specializes in importing only American cars like the 400hp Dodge Challenger. Mr. Hix sells a mere 300 cars a year to his specialized audience.

“Unfortunately, most American manufacturers show no interest in the German market,” he said, and gives his Dodge as a prime example. First, he must get the car from a dealer in Canada, and then has to rebuild the car from the ground up to meet European safety specifications, which are more stringent than in the US.

The process adds about 30 percent to the American car’s sticker price, he said, so an import duty is really no impediment to the handful of enthusiasts who really want a muscle car. What most German car buyers want is a German-made car.

“In Germany, our own car companies are very strong and dominate the public’s imagination,” he said.

This article was adapted into English from Handelsblatt’s sister publication Wirtschaftswoche. To contact the authors: konrad.fischer@wiwo.de

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