VW and Mercedes Answer Trump With Price Hikes, Output Shifts

Europe’s automakers are raising prices and preparing to shift car production to the US to try to protect themselves from President Donald Trump’s tariffs.

Author of the article:

Bloomberg News

Stefan Nicola and William Wilkes

Published Apr 03, 2025  •  4 minute read

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(Bloomberg) — Europe’s automakers are raising prices and preparing to shift car production to the US to try to protect themselves from President Donald Trump’s tariffs.

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Volkswagen AG plans to add import fees to the sticker prices of its vehicles shipped into the US, indicating Trump’s 25% auto duties will have an immediate effect on Europe’s biggest carmaker. Volvo Car AB and Mercedes-Benz Group AG are looking at expanding local output to sidestep the levies.

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German carmakers are among the most affected by Trump’s higher levies on auto imports, which are expected to dramatically increase costs and upend supply chains. Robust demand for more profitable sport utility vehicles and US consumers’ slower shift to electric vehicles make it a lucrative market for the likes of Mercedes, BMW AG and Porsche AG.

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The tariffs, which took effect Thursday, represent a “fundamental turning point in trade policy,” said Hildegard Müller, head of Germany’s auto lobby VDA. The move will only produce losers, including in the US, where consumers will be hit by “rising inflation and a reduced choice of products.”

Trump’s trade moves already have rattled the auto industry, with buyers rushing to lock in deals, and shares slumping on fears of soaring costs. German auto stocks fell Thursday, with Volkswagen and Mercedes dropping more than 3% early in intraday trading, and BMW declining as much as 4.4%.

VW sent US dealers a memo informing them of the import fees, as well as moves to temporarily halt rail shipments of vehicles from Mexico and hold at port cars shipped from Europe, Automotive News reported. The company confirmed the memo’s existence without commenting on the fees, saying it has its “dealers’ and customers’ best interest at heart.”

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Mercedes may need to shift output of a model to the US to deal with the cost of the duties, the company’s production chief Jörg Burzer said Thursday, declining to comment on which vehicle may be moved to its factory in Tuscaloosa, Alabama.

Its most popular import is the GLC, which starts at around $50,000. The German luxury-car maker sold 64,163 units of the midsize SUV in the country last year, up 58% from 2023. Mercedes is also considering withdrawing sales of its smaller, least expensive models in the US, Bloomberg reported earlier this week.

Germany’s outgoing economy minister, Robert Habeck, welcomed the European Commission’s push for talks with the Trump administration, but warned of a “clear and decisive response” if the US rejects a compromise. “The US tariff mania could trigger a spiral that could also drag countries into recession and cause massive damage worldwide,” Habeck said.

Volkswagen operates a factory in Tennessee where it makes the electric ID.4 and larger Atlas SUVs. Models including the ID. Buzz van and Golf hatchbacks are imported from Europe, while Tiguan and Taos SUVs and Jetta compacts are shipped in from Mexico.

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The German manufacturer has long sought to grow in the lucrative North American market, where it generated around a fifth of its revenue last year. The company posted a 7% increase in deliveries in the region in 2024, helping to soften the blow from slumping sales in China.

BMW imported around 60% of the cars it sold last year in the US, its second-largest market. The company’s plant in Spartanburg, South Carolina — its biggest globally — churns out around 400,000 vehicles a year, but the site imports key parts including engines from Europe.

Mercedes shipped cars to the US last year including the C-Class and E-Class sedans. Its Alabama plant makes combustion-engine and electric models such as the GLE and EQS SUVs, yet also ships in key parts including engines and gearboxes from Europe.

The tariff pain isn’t restricted to Germany. Stellantis NV, the owner of the Fiat and Jeep brands, is temporarily halting work at factories in Canada and Mexico in response to the duties.

Sweden’s Volvo will have to increase the number of cars it makes in the US and move output of another model to its South Carolina factory, Chief Executive Officer Håkan Samuelsson said in an interview Thursday. Volvo already builds EX90 and Polestar 3 EVs at the sire near Charleston and “will have to look closely” at what other model it will add to production lines, he said.

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Italy’s Ferrari NV last week said it plans to raise prices for some of its cars in the US by as much as 10%, a move that could add tens of thousands of dollars to their sticker prices.

In the UK — which exported almost 80% of the cars it produced last year — the auto trade lobby warned that American consumers likely will now have to pay more for Range Rovers, Minis, Bentleys and Aston Martins.

“These tariff costs cannot be absorbed by manufacturers, thus hitting US consumers who may face additional costs and a reduced choice of iconic British brands,” said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders. “UK producers may have to review output in the face of constrained demand.”

—With assistance from Monica Raymunt, Wilfried Eckl-Dorna, Iain Rogers and Rafaela Lindeberg.

(Updates with VW comment in sixth paragraph.)

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