IMPORT TARIFFS

Audi Unfazed by Trump Threats

New plant of German auto company Audi in Mexico
Audi's plant in Mexico is one of many in Donald Trump's firing line. Source: DPA

Audi’s timing could hardly be worse. Just a few weeks after the automaker opened its first plant in Mexico, Donald Trump won the U.S. presidential election on a fiercely protectionist platform.

If Mr. Trump makes good on his threats, repeated in an interview with German and British media earlier this week, Audi could face a 35-percent import tariff before its vehicles cross the border into the United States.

The VW subsidiary plans to manufacture 150,000 Q5 model SUVs at its plant in San Jose Chiapa by the end of 2017, with 30 percent of the production intended for the U.S. market.

Audi, however, hasn’t been fazed by Mr. Trump’s threats against Ford, General Motors and BMW for their plans to build plants in Mexico. Dietmar Voggenreiter, the head of sales at Audi, told Handelsblatt he sees no reason for the automaker to change its plans to ramp up production there.

Tariffs don’t support marcoeconomic economic development, the Audi executive said.

Instead, the premium automaker will wait and see what policies are actually implemented by Mr. Trump, Mr. Voggenreiter said in an interview. Right now, there’s only speculation, he said.

Mr. Voggenreiter made a subtle swipe at Mr. Trump’s campaign rhetoric. Tariffs don’t support macro-economic development, the Audi executive said.

But there’s another reason Audi, like many German carmakers, is able to hold firm. Though Audi just opened a plant in Mexico, the automaker’s real focus is China, where it recently announced plans to ramp up electric car production.

As a first step, Audi and its Chinese partner, FAW Group Corp, plan to introduce China’s first domestically-manufactured plug-in hybrid, the A6 L e-tron. Over the next five years, Audi plans to start production on five more e-tron model vehicles in China. And by 2025, the premium automaker aims to manufacture an electric SUV and sedan in the country.

Audi has a lot of catching up to do in China, where German carmakers have long been among the world’s leading producers. Rivals Daimler and BMW are already manufacturing electric cars in China for the country’s domestic market.

Automakers will face additional pressure in the coming year. The Chinese government has drafted legislation that mandates electric cars must constitute 8 percent of the automakers’ overall sales.

In November, Audi reached a preliminary agreement with China’s SAIC Motor Corp to increase cooperation, but Audi dealerships rebelled against the framework deal over concerns that they would lose business to SAIC.

Mr. Voggenreiter said Audi is continuing to explore avenues of cooperation with SAIC, while trying to allay the concerns of Audi dealers.

 

Stephan Scheuer is Handelsblatt’s correspondent based in Beijing. To contact the author: scheuer@handelsblatt.com

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