Tariffs Will Cost Us €1 Billion Says BMW CEO

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BMW expects escalating trade conflicts between the US, Europe and China to cost the carmaker about €1 billion ($1.1 billion) this year, Chief Executive Officer Oliver Zipse said.  “We don’t think that all these tariffs will last very long, though some of them might last longer,” Zipse said Friday in a Bloomberg Television interview with Oliver Crook. With a cost estimate of €1 billion, “we are quite safe,” he added. BMW and other European carmakers are bracing to see the full extent of President Donald Trump’s planned tariffs on vehicles imported to the US. The levies threaten to hit not just cars made in Europe but also those produced at plants in Mexico and Canada, which automakers have operated for years under previous trade agreements. BMW is already facing duties on vehicles it produces at its plant in San Luis Potosi, Mexico, for export to the US. Trump has postponed the tariffs for companies in compliance with the USMCA trade deal, but BMW falls short of local content rules.  --------  Watch Bloomberg Radio LIVE on YouTube  Weekdays 7am-6pm ET  WATCH HERE: http://bit.ly/3vTiACF     Follow us on X: https://twitter.com/BloombergRadio    Subscribe to our Podcasts:        Bloomberg Daybreak: http://bit.ly/3DWYoAN      Bloomberg Surveillance: http://bit.ly/3OPtReI      Bloomberg Intelligence: http://bit.ly/3YrBfOi      Balance of Power: http://bit.ly/3OO8eLC      Bloomberg Businessweek: http://bit.ly/3IPl60i    Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:  Apple CarPlay: https://apple.co/486mghI  Android Auto: https://bit.ly/49benZy     Visit our YouTube channels:  Bloomberg Podcasts: https://www.youtube.com/bloombergpodcasts  Bloomberg Television: https://www.youtube.com/@markets  Bloomberg Originals: https://www.youtube.com/bloomberg  Quicktake: https://www.youtube.com/@BloombergQuicktake

Transcript

00:00Overall, we take a conservative view.

00:03We take about a billion, which is about 1% in EBIT.

00:08But on the other hand, we advocate free trade at the same time, and we don't think that

00:14all these tariffs will last for very long.

00:18Some of them might last a little bit longer, but we accounted for that with one billion

00:24euros in our guidance.

00:27So from that point of view, we are quite safe.

00:30But at the same time, we of course fight for free trade because if you overdo it with tariffs,

00:39it sends a negative spiral to all market participants.

00:42So there are no winners in that game.

00:45And let me add one final word.

00:48We have a plant in Spartanburg, which is the biggest plant at BMW.

00:54Of course, that is kind of a natural protection because more than 50% of the products we sell

00:58in the United States are produced in the United States, and therefore, they're covered from

01:06any tax changes.

01:09And I saw that also by the export value shipped from your South Carolina plant, it is that

01:15you're actually the biggest exporter of U.S. cars in the world.

01:18Is that a point that you have made to the Trump administration?

01:23Oh yes, oh yes.

01:26I spent two days in the United States in Spartanburg, and we had very close cooperation with the

01:32South Californian government.

01:34And you know, we create 120,000 jobs in the United States, direct and indirectly.

01:41Almost 12,000 people alone in South Carolina in our plant.

01:45So we are at our heart, this is our second home, and in the last 10 years, we had more

01:52than $100 billion in exports since 2014.

01:56So we are a not-to-be-ignored market participant over there.

02:02And again, we have strong support.

02:06As we speak, one final word, as we speak, we invest almost $2 billion in the United

02:13States.

02:14And that is, of course, politically a big asset for us.

02:18And then in terms of your sort of operations in Mexico, you say that you're, is it correct

02:22that you're absorbing for now the cost of the tariffs?

02:25Is that what that one billion euros you've sort of put forward to?

02:28And also, do you consider the USMCA agreement to be safe?

02:32And if it is, are you going to have to sort of change how you build the cars in Mexico

02:36so that they're USMCA compliant?

02:38Is that something that you're planning to do?

02:42Yeah.

02:43Look, we took care of these effects in our guidance already.

02:51And UCMCA, this is, again, a very volatile thing.

02:55We have to see what is happening in the last two days, but again, we took a conservative

02:59stance and put it into our guidance.

03:03And in terms of the Chinese market, because this is another sort of point, it sounds like

03:05it deteriorated again in the back half of the year.

03:08Do you expect sales to decline further this year?

03:12Actually, no.

03:18We went down with about a little bit over 100,000 units.

03:22You know, what is happening in China is quite a natural thing.

03:27The market share of Chinese manufacturers has increased in the last five years significantly.

03:36And that was something which we expected.

03:38This is not a surprise so much.

03:41It is still, to this day, the largest car market in the world.

03:45We sold last year more than 100,000 electric-only cars.

03:50And from a market share point of view, still, the market share in China is higher than in

03:55the rest of the world.

03:56And we are still the leading premium segment participant.

04:01So, of course, we know this is a tough market condition.

04:05We are aware of that, especially on the pricing side.

04:07But on the other end, we see we're going to stabilize there over the course of this year.

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