VVolkswagen's Chief Executive Officer seeks engagement with the Trump administration.
The looming U.S. tariffs on imports from Canada and Mexico are causing a rough sea for the German automotive sector, with Volkswagen appearing to take the brunt of the storm. Volkswagen's CEO, Blume, is proactive in addressing the situation, stressing the need for immediate action.
Volkswagen is reaching out to the Trump administration, seeking a dialogue to possibly influence the tariff decisions. Blume stated, "We will now initiate short-term contact with the new Trump administration."
The Volkswagen Group is investing hefty sums in the U.S., constructing a factory in South Carolina and supplementing its Tennessee plant. These projects amount to "over ten billion US dollars," according to Blume. He emphasized, "Companies that invest, create jobs, and contribute to regions should receive consideration when it comes to tariffs."
It's worth noting that U.S. President Trump has announced a tariff hike on imported vehicles starting April 2nd. This could significantly impact the competitiveness of German automakers, including Volkswagen, which relies heavily on its Mexican factory for two-thirds of its U.S. sales, as per Stifel Research analysts.
While premium automakers might be able to absorb the tariff hike by charging customers more, Volkswagen, being a volume manufacturer, might find it challenging to pass along the increased costs. However, VW Group CEO Blume argues that the company's substantial investments in the U.S. could sway Trump to show leniency.
If diplomacy fails, Volkswagen might consider leaving the U.S. market with its core brand and switching its U.S. plant to produce Porsche and Audi models, according to Stifel Research's Daniel Schwarz. But, it's essential to remember that this transition would take time and could occur after Trump's term ends, raising the question of its viability.
The potential impacts of the U.S. tariffs on German automotive companies, particularly Volkswagen, are multi-faceted: increased costs due to tariffs, supply chain disruptions, potential impacts on exports, higher vehicle prices for consumers, and the need for production shifts, diversification of the supply chain, and lobbying efforts.
Donald Trump's announcement of a tariff hike on imported vehicles, set to start on April 2nd, could affect Volkswagen significantly due to its reliance on its Mexican factory for two- thirds of its U.S. sales. The company's CEO, Donald Blume, is actively reaching out to the Trump administration, aiming to initiate a dialogue and influence the tariff decisions, as he mentioned, "We will now initiate short-term contact with the new Trump administration." Furthermore, Blume emphasized that Audi, a premium brand under the Volkswagen Group, could potentially help in swaying Trump's decision regarding tariffs, given the group's substantial investments in the U.S., such as the construction of an Audi factory in South Carolina.
