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Donald Trump's Inauguration: Everything on Tension!

Donald Trump will become President of the United States of America for the second time on January 20, 2025, and many are still struggling to believe it. However, the re-election was no surprise. The impact on the European automotive industry is likely to be significantly more intense than in 2016.

Donald Trump: He starts with many announcements that don't always match each other - but still drives many ahead of him - including the automotive industry outside the USA...| Graphic: Pete Linforth/Pixabay
Donald Trump: He starts with many announcements that don't always match each other - but still drives many ahead of him - including the automotive industry outside the USA...| Graphic: Pete Linforth/Pixabay
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Donald Trump becomes the 47th President of the USA – irony of history: at 17:47 Central European Time. And times are unlikely to get any easier for Europe's car manufacturers. It is clear that it would not have been easy for European and especially German car manufacturers even if Kamala Harris had won the presidential election. She, like Joe Biden, the 46th President, had also supported strengthening their own firms.

Electromobility or not? Let competition decide!

Even though electric pioneer Elon Musk often played a prominent role in Trump's extended advisory team, Donald Trump proclaims a departure from green technologies in his second term. Real competition should determine which drive vehicles are on the road, following the opinion that Elon Musk also shares, although Tesla only offers electric vehicles. A ban on internal combustion engines like the one in Europe planned for the middle of the next decade is unthinkable in the USA, as it is essential to strengthen the domestic industry – more so than ever with Donald Trump at the helm of the country.

Tariffs for America first

The bigger problem is the punitive tariffs that Trump loudly blustered about during his campaign. The US economy should be strengthened according to the motto "America First," and this not only impacts economic relations with China but also with an increasingly less influential Europe, with Germany as the driving force in the automotive sector. Unlike in South and Central America, Chinese vehicles currently play no role in North America; just this autumn, the Biden administration increased the 25 percent punitive tariffs on electric cars from China to 100 percent. This is unlikely to change anytime soon.

BMW is among the largest vehicle exporters in the USA

Manufacturers like BMW, Volkswagen, or Mercedes have long operated large production facilities in the United States. BMW, in particular, has had a gigantic plant in Spartanburg, South Carolina, for about three decades. Over the years, the southern state plant, especially where the larger X-SUV models are produced, has become BMW's largest manufacturing facility with around 450,000 vehicles – significantly larger than in Munich, Dingolfing, or Regensburg and at noticeably lower costs. Yet BMW also sells its sedans from the 3 Series, 5 Series, and 7 Series successfully in the USA between the Pacific and the Atlantic. These models mostly need to be imported from Europe, and years ago BMW decided to install another plant for smaller vehicles in Mexico (San Luis Potosi). Starting from 2027, the models of the new class for all of America are to be manufactured here, and a year ago, the foundation stone for battery production was laid. This could also become a problem, like the still young Audi production in San José Chiapa, Mexico, as Donald Trump wants to significantly increase customs barriers with respect to Mexico.

Audi and Porsche do not have a plant in the USA

While almost all premium manufacturers have long secured at least one production facility in the USA, things look bleak for Audi and Porsche. If Donald Trump enacts the loudly orchestrated punitive tariffs of between 10 and 25 percent, it will also become an expensive nuisance for German brands. Not different is the situation for Mercedes. The Swabians produce primarily large SUVs like the GLE, GLE Coupé, as well as the GLS and GLS Maybach at the Tuscaloosa, Alabama location, similar to BMW. Since 2022, the all-electric models EQS SUV and EQE SUV have also been produced there and since 2023 the new Mercedes-Maybach EQS SUV as well. The batteries for the EQ models come from a factory in the neighboring Bibb County. But coupés or sedans such as the C-Class, E-Class, S-Class, or the new CLA (available as an electric model or hybrid) are also imported from Germany to the USA. This could become expensive not only due to punitive tariffs but also due to the frequent requirements for regional components (Local Content).

The entire VW Group is under pressure: Productions cannot be easily shifted

Volkswagen is also under pressure because production in Chattanooga, Tennessee, with the VW Atlas and ID4 is significantly smaller than originally planned. Many of the US models – whether electric or combustion engine – currently come from Mexico, Brazil, or even Argentina to North America. If Trump implements his planned punitive tariffs here, hardly any manufacturer can act quickly and shift their models to other lines in the USA. Production planning usually requires several years of lead time. However, almost none of the CEOs of European companies are likely to engage in a muscle game with the new US President. In economically difficult times, too much is at stake, and in the weeks since the Trump election, there have generally been rather mild voices saying they wanted to strengthen American factories as well as partnerships. For instance, Volkswagen has recently entered into a billion-dollar cooperation with the electric start-up Rivian.

 

Virtually all Asians produce in the USA, but: All US manufacturers have assemblies in Mexico

Volvo, which belongs to the Chinese Geely Group, reacted years ago. The new luxury SUV EX90 rolls off the assembly line in Charleston, South Carolina. Similar productions have existed for years at brands such as Mazda, Toyota/Lexus, Hyundai/Kia, Nissan, or the Stellantis Group with its US labels Jeep, Dodge, or Ram. Anyone who wants to be successful in the US in the long term will have to produce their vehicles offered here in the United States; also to gain trust and support from the national dealerships, which are far more powerful in the US than in Europe. The situation is problematic not only for the car manufacturers themselves but also for European suppliers like ZF, Bosch, Magna, Schaeffler, or Gestamp, who currently have to fight against dwindling revenues and market demand under strained conditions.

But Trump will also be aware of the importance of European car manufacturers for his nation, as it is not just about up to 150,000 jobs and votes, but also about the USA as a location. For example, BMW has been the largest car exporter from the United States for years – something that is likely very much to the taste of Donald Trump and the new Republican government.

What does that mean?

Tough times are ahead for non-US firms – though it will be interesting to see how Trump evaluates the assemblies of US manufacturers in Mexico – and the US productions of foreign brands…

The evaluation was conducted for us by Stefan Grundhoff from press-inform, who spends time in the USA several times a year and conducts research on-site.

Translated automatically from German.
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