BMW to raise prices in China due to trade tensions fallout

BERLIN - BMW will be forced to raise the prices of its vehicles sold in China due to higher import tariffs, the German luxury carmaker announced on Monday.

"BMW China will not be able to completely absorb the higher tariffs for cars imported from the US," a spokesperson of the DAX-listed company told the press in Munich.

"At the moment we are calculating necessary price increases in this context," the official added.

Trade tensions between the United States and China, the world's top two economies, have escalated since Friday, when the United States began imposing a 25 percent additional tariff on Chinese products worth $34 billion.

China was forced to retaliate. Its customs authority announcing that additional tariffs for some imports from the United States worth the same amount, including agricultural products, vehicles and aquatic products, took effect on the same day.

BMW operates its largest car assembly line in Spartanburg in the US state of South Carolina, from where it has traditionally exported the SUV models X3 and X6 to China and other destinations across the world.

In May, the German company opened a new factory in Shenyang, China. The factory has already taken over the production of the X3 for the Chinese market from the Spartanburg site in a first major supply-chain shift at BMW in reaction to the trade war launched by the US administration.

BMW is not the first German carmaker for whom the implementation of Trump's "America First" doctrine has begun to create financial and logistical issues. In June, Stuttgart-based Daimler lowered its earnings forecast for 2018 as a result of the escalating trade frictions.

In a statement to investors, Daimler emphasized that it would not be able to fully offset the effects of the spiralling trade confrontation through the reallocation of vehicles to other markets. The SUV assembly line operated by Daimler's flagship brand Mercedes-Benz in Vance, Alabama, in particular was likely to be hit as sales in the important Chinese market fell.

Volkswagen and BMW retained their leading positions in the global automotive industry during the first quarter of 2018, according to a study by the accounting firm Ernst & Young. Wolfsburg-based Volkswagen topped the international list in terms of total sales and revenue, while BMW achieved the first place for profitability.

According to the study, buoyant business in China was once again a key driver of growth for the German carmakers.