As President Donald Trump’s new term begins, Volkswagen is voicing its strong opposition to potential tariffs on US imports, warning of a “harmful economic impact” on American consumers and the global automotive industry. The German carmaker’s concerns stem from the proposed 25% import duties on Mexico, where Volkswagen has a major factory, in addition to levies on global imports and Chinese goods.
Tariffs Threaten to Hit Volkswagen Hard
Volkswagen’s concerns come at a time when the company is already facing a sales slowdown, increasing costs, and competition from cheaper Chinese competitors. With a significant factory in Mexico, the carmaker is worried that tariffs could make its exports to the US uncompetitive. According to analysts, 65% of Volkswagen’s US sales would be affected if duties were added to Mexican imports. To mitigate this risk, Volkswagen is investing over $10 billion in the US, shared between its Tennessee plant and a joint venture with EV startup Rivian.
Tariffs Not Trump’s Only Challenge for Volkswagen
While tariffs pose a significant threat, Volkswagen is also facing other challenges, including a decrease in global demand, higher production costs, and competition from low-cost Chinese rivals. The company has been struggling to transition to electric vehicles, a trend driven by government subsidies. In Germany, the government’s decision to scrap buyer subsidies has further hindered Volkswagen’s efforts to shift towards electric vehicles.
Volkswagen’s Partnership with Rivian
Volkswagen’s partnership with Rivian, an EV startup, aims to provide the company with cutting-edge electrical architecture and software for its electric vehicles. The collaboration marks a significant step towards the company’s goal of electrifying its portfolio. By investing in the US, Volkswagen aims to maintain its presence in the market and capitalize on growing demand for electric vehicles.
A Call for Open Dialogue
Despite its concerns about tariffs, Volkswagen is committed to maintaining a “longstanding and constructive partnership” with the US administration. In a statement, the company emphasized its value for collaboration and open dialogue with the new government. As the automotive industry navigates a complex global landscape, Volkswagen’s call for understanding highlights the need for open communication between governments, companies, and consumers to address the challenges facing the industry.
SOURCE: Ref Image from The Globe and Mail
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