The additional cost of tariffs has to be made up for somehow.
It has begun. Some of the first US-made vehicles being exported to China are experiencing price increases due to the additional costs of tariffs on US car imports. Reuters reports that the Spartanburg, South Carolina-built BMW X5 and X6 crossover SUVs, both very popular in the world's biggest auto market, have increased in price by 4 to 7 percent, effective starting today in China.
Interestingly, some industry analysts figured the expected price increases would have been more, but BMW is apparently willing to absorb most of the higher costs. How come? Because there's fierce competition among luxury brands in China and adding too much to the price tags is not in BMW's best interest.
The automaker has no choice but to do something in regards to a price increase ever since China began imposing new tariffs earlier this month on roughly $34 billion of US imports, which also includes soybeans and even lobsters. For US-built vehicles, China also added an extra 25 percent import levy starting July 6. This means China now has a 40 percent total import duty on all cars from the US. BMW doesn't appear to be too pleased by this latest development, with a spokeswoman telling Reuters: "BMW stands for free (trade) but can't stand still without taking actions to respond to the market changes."
Spartanburg also builds the popular X4, which is also imported to China. For now, it doesn't appear BMW has increased its price tag, but that could change in the near future. Not surprisingly, BMW isn't alone in its dilemma of racing prices and trying to absorb most costs. Ford has already said that, for the time being, it won't increase its prices in China and will absorb costs in an "effort to sustain its business momentum." BMW's arch-rival, Mercedes-Benz, slightly increased the price of the GLE midsize SUV in China, which is built in Alabama. Chances are we haven't heard the last of US-built auto price increases in the world's biggest auto market.