Foreign Automakers Take it on the Chin

German and Japanese automakers are realizing substantial losses and realigning their strategies in response to new U.S. import tariffs on vehicles. 

The VDA, Germany’s automotive industry association, repored that manufacturers incurred approximately €500 million in additional costs in April alone due to a 25% tariff on imported vehicles and parts.

The financial pressure is prompting German OEMs to consider moving more assembly to the US, as seen in Volkswagen Group’s reported plans for a stateside plant for the Audi marque.   Such chatter may be designed to mollify the White House as negotiations continue between Brussels and Washington. 

Japanese automakers have responded by cutting export prices rather than passing the cost on to American consumers, just as President Trump's trade hawks have called for.    According to Nikkei Asia, manufacturers reduced export prices to the U.S. by about 20% in May to offset the 25% tariff.

While export volumes declined by only about 4%, the total value of shipments fell nearly 25%, reflecting a deliberate effort to preserve market share at the expense of profit margins.   NLI Research estimates losses could reach up to ¥1.3 trillion if the price cuts continue, even as vehicle volumes show only modest declines.