Bloomberg and staff reporter
The European Union’s probe into Beijing’s electric vehicle subsidies is meant to protect its carmakers from a flood of cheap Chinese cars. But if it leads to tit-for-tat tariffs, Mercedes-Benz and BMW’s biggest moneymakers will be most exposed.
For Germany’s high-end manufacturers, including Porsche, China has proven an insatiable market for their most expensive models, like the S-Class, 7-Series and Cayenne SUV.
Those vehicles, however, are mainly imported, putting them in the line of fire if Beijing retaliates against any EU measures.
”Those who live in glass houses shouldn’t throw stones,” Bernstein analysts Daniel Roeska and Eunice Lee said in a note. The three German luxury carmakers are at the greatest risk of taking a big hit should the trade dispute escalate, they said.
China is the biggest destination for Germany’s most expensive cars. Last year, the country accounted for more than a third of global sales of BMW’s 7-series and Mercedes’ S-Class. The 1.47 million yuan (HK$1.57 million) Maybach ships more than 1,000 times a month from Chinese showrooms.
Roeska and Lee estimate that Chinese revenue streams represent more than 25 percent of the German automakers’ underlying net income.
If China decides to respond with import tariffs, “Made in Germany” – long considered a badge of sophistication – could prove a drawback.
Vice premier He Lifeng expressed “strong concern and dissatisfaction” on Monday during a meeting with the EU’s chief trade negotiator, Valdis Dombrovskis, over the bloc’s anti-subsidy probe into Chinese EVs.
But the meeting, the Ministry of Commerce also revealed that China and Europe have reached a series of agreements including setting up a working group to enhance collaboration in financial regulation, sustainable finance and financial technology.
Meanwhile, in response to reports about Ford’s temporary halt in collaboration with the Chinese battery giant CATL for a battery factory project, sources within CATL stated that they are closely monitoring the situation and that their partnership with Ford on the project is proceeding as scheduled.
