By William Boston
BERLIN--Shares in German auto companies tumbled Monday after the U.S. President-elect singled out BMW AG, Daimler AG and Volkswagen AG, threatening to impose a 35% import tariff on their exports from Mexican plants to the U.S.
Donald Trump raised concerns in Germany following comments published Monday in an interview with leading daily Bild newspaper suggesting the country's biggest industry could be hit hard by tougher trading rules with the U.S.
At 1200 GMT, BMWshares were down 2.1% at EUR86.01 ($90.54), Daimler shares fell 2.0% to EUR69.90, and shares in Volkswagen, which owns luxury car maker Audi, fell 2.2% to EUR146.25.
Mr. Trump singled out BMW, the Munich-based maker of luxury sedans and sport-utility vehicles.
"I would tell BMW if they want to build cars in Mexico and sell in the U.S.A. without a 35% tax, they can forget it," Mr. Trump said, according to a Wall Street Journal translation of his comments in Bild.
"They can build cars for the U.S.A. but for every car that comes into the U.S.A. they will pay a 35% tax. What I'm saying is, they have to build their factory in the U.S.A. It will be much better for them and for our efforts."
BMW is preparing to build its 3-series sedans at a plant in San Luis Potosi, Mexico, beginning in 2019. The plant will add global capacity to the 3-series' production in Germany and China.
Mr. Trump's attacks against Ford Motor Co andGeneral Motors Corp have led them to make concessions. Earlier this month, Ford scrapped plans for a new $1.6 billion plant in Mexico, instead choosing to build small cars in an existing Mexican factory and to invest $700 million in a Michigan facility that will build electric vehicles.
The German car manufacturers aren't reacting to Mr. Trump's warnings. In a response to the Bild interview, BMW stood its ground.
"The plant in Mexico will produce the 3-series for the global market and will be completed in 2019," Klaus Fröhlich, BMW head of development, told reporters on the sidelines of a technology conference in Munich.
Mr. Trump identified the German auto industry as a whole, suggesting trade with the U.S. was unfair and unbalanced.
"When you walk down Fifth Avenue everybody has a Mercedes-Benz parked in front of his house," Mr. Trump said.
Addressing Germany, he said: "You were very unfair to the U.S.A. It's notmutual. How many Chevrolets do you see in Germany? Not many, maybe none, you don't see anything at all over there. It's a one-way street."
Sigmar Gabriel, German vice chancellor and economics minister, rejected the accusations and fired back a barb of his own. If U.S. car makers want to sell more in Germany, "they just have to build better cars," he said. "I can only warn against getting excited now. We are not weak and inferior."
German auto makers have a long history of manufacturing in Mexico. Volkswagen, the world's largest auto maker by sales, operates one of its largest plants in Puebla, where it began producing Beetles in 1964.
Matthias Wissmann, head of the Association of German Automobile Manufacturers, said import tariffs would hit the German economy and harm the U.S.
"The U.S. is not only the second-largest export market for German manufacturers, it is also an important manufacturing location from which the global market is supplied," he said on Monday.
Daimler and Audi declined to comment. Volkswagen didn't immediately respond to a request for comment.
Analysts were puzzled that Mr. Trump singled out BMW which manufactures sport-utility vehicles in South Carolina and exports at least 70% of them to other countries.
The car maker produced 411,171 X-series sport-utility vehicles at its South Carolina plant last year, supporting directly and indirectly about 70,000 jobs, BMW said.
In September 2015, Mercedes said it would invest $1.3 billion to expand its Tuscaloosa County, Alabama factory, bringing its total investment in the plant to $5.8 billion with a workforce of 3,800. Last year, the company produced around 300,000 vehicles in Alabama.
German and other auto makers have flocked to Mexico to take advantage of cheap labor and Mexico's many free trade agreements. Audi, for example, is building Q5 SUVs in Mexico and exporting them back to Europe. Exports from a U.S. plant would carry trade tariffs because the U.S. and the European Union don't have a free-trade agreement.
Write to William Boston at email@example.com
(END) Dow Jones Newswires
January 16, 2017 08:27 ET (13:27 GMT)
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