LOS ANGELES – The escalating trade war between the United States and China, which took a new turn last week, could affect BMW's largest factory in the world, told a top manager Automotive News.
China is the largest export market for the Spartanburg, S.C., factory, which produces the popular X-series crossovers and employs about 10,000 people.
The factory exported 73 percent of the 371,284 vehicles it produced last year. Almost a third of that export volume was on its way to China.
The two countries have this year increased their car taxes by means of retaliatory rights. The United States has set a rate of 25 percent on Chinese vehicles on top of the 2.5 percent that is normally levied. China reduced the tariffs for all other countries to 15 percent but imposed an additional 25 percent retaliation price on US vehicles.
"Higher prices, higher taxes, higher rates … will exert some pressure," said BMW of North America CEO Bernhard Kuhnt at the Los Angeles Auto Show. "That is absolutely clear."
As vehicles become more expensive due to rates, it "will affect customer behavior," he said.
The US fired the last salvo last week, when US trade representative Robert Lighthizer said he was investigating all available tools to raise tariffs for Chinese vehicles to the 40 percent level that China now imposes on US vehicles.
China has played an increasingly important role in the crossover sales of BMW, according to Karl Brauer, executive publisher of Autotrader and Kelley Blue Book.
"With most of these vehicles produced in Spartanburg, any tariffs that affect Chinese demand will also affect that plant and the economy of that region," said Brauer.
BMW is considering building more crossovers in China, as it is expected that the tariff war will lower the German car manufacturer's profit by 2018 by € 300 million ($ 341 million), according to CFO Nicolas Peter, according to Reuters.
"We will make a definitive decision in the coming weeks about which model we will locate in China," Peter said.