European car industry nervous about Trump

Jangling uncertainty over US president-elect Donald Trump’s attitude to free trade has lead to statements of concern from European car industry leaders.

Germany’s peak car-making body, the VDA, and Volkswagen Group CEO Matthias Müller have confirmed Trump’s presidency could have a detrimental effect on their fortunes in North America, in particular.

Trump has spent the last year loudly and repeatedly insisting he will introduce sweeping new protectionist tariffs to force car-makers to build cars in the US and not in Mexico.

Ford came in for the heaviest criticism from Trump, who criticised the US car-maker for moving jobs to Mexico when it actually moved low-margin small-car production south of the border and replaced it with high-profit F-Series pick-up production.

"It is to be feared that the United States under a new president, just like China, will mainly focus on their own economies, at the expense of international trade flows and relationships," the VDA said in a statement overnight.

The VDA represents both car-makers and their suppliers, with its list of members including Bosch, BMW, Porsche, Volkswagen, Audi and Daimler.

While trying to remain neutral, Volkswagen’s Müller told Handelsblatt he hoped a Trump presidency would not be "more detrimental" to Volkswagen’s efforts to finalise its Dieselgate settlement with the US Department of Justice.

German car-makers have pushed into Mexico to take advantage of the zero-tariff, free movement rules of the North American Free Trade Agreement between Canada, the US and Mexico.

The growth in Mexican car-making under NAFTA is so pronounced that consulting firm IHS estimates a quarter of all North American capacity by 2020 will come from Mexico.

Mercedes-Benz opened a plant in Tuscaloosa, Alabama, in 1993 to build the M-Class. It currently builds the C-Class, GLE and GLS. BMW followed a year later with a plant in Spartanburg, North Carolina, that now builds the X3, X4, X5, X6 and, soon, the X7.

Volkswagen also has a plant in Chattanooga in Tennessee to build the Passat and it will also build the Atlas SUV in Mexico from next year.

While all three German car-makers will continue with their US plants, they have all invested in Mexico. BMW has broken ground on a new $US2.2 billion factory in San Luis Potosi, Mexico, to make 150,000 cars a year, mostly to export back into the US.

Audi already has its 150,000-unit plant up and running in Puebla to build the Q5 in both petrol and electric forms, while Benz will open a joint-venture plant with Renault-Nissan in Mexico from 2018 and key supplier Bosch has 10 facilities there.

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