German carmakers weigh price, production shifts to soften tariff impact

German premium carmakers exposed to US import tariffs are weighing long-term strategies from raising prices and lowering output to shifting production to deal with the added cost. 

Volkswagen's premium Audi brand said on Tuesday it was considering "the extent to which we will have to pass on at least some of the tariffs to our customers in the form of price increases", and seeking a "sweet spot" between price increases and adjusting production. 

Audi has no factories in the US and makes its most popular model in the country, the Q5, at its plant in San Jose Chiapa, Mexico - a country targeted by Trump in his tariff push. 

Also on Tuesday, Mercedes-Benz' production chief Joerg Burzer said the carmaker's decision on whether to carry on importing its GLB crossover from its joint venture in Mexico to the US depended partly on whether its competitors responded to tariffs by localising production in the US 

Audi said the brand will announce this year where in the region it will start producing its main models for the US market.

 

Another potentially promising option for Mercedes-Benz was to import vehicles from South Africa, which has duty-free access to the US, Burzer said. 

"Of course, that could change any day," Burzer added. "I have never seen such a complex environment... the key competence you need today is flexibility." 

Hope for agreement 

Trump earlier in March agreed to exempt automakers for a month from his punishing 25 per cent tariffs on Canada and Mexico if they complied with existing free trade rules. 

BMW, which does not comply with those rules, told US dealers it would pay for the cost of the tariffs itself for the next few weeks, as executives await clarity on how long tariffs will last. 

"There are numerous plans lying in drawers, so one can take action when necessary," Jan Mischke, partner at the McKinsey Global Institute, said, adding carmakers were waiting to pull the trigger until they had clarity. 

The European Union is in talks with the US government to seek a solution on what Trump has called reciprocal tariffs, which could lead to added duties on EU imports. 

Audi's Chief Financial Officer Juergen Rittersberger said he still hoped for an agreement. 

The Audi Group, which also includes the Bentley, Lamborghini and Ducati brands, said on Tuesday it expects an operating margin of 7-9 per cent this year, up from 6 per cent in 2024. 

Audi on Monday unveiled up to 7,500 job cuts in a push to raise margins and lower costs, bringing total cuts planned by the Volkswagen Group by the end of the decade to just below 48,000, or 7.8 per cent of its global workforce.     

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