Trade war flak hits BMW's Spartanburg plant

LOS ANGELES — The escalating trade war between the U.S. and China, which took a new turn last week, could affect BMW's largest factory in the world, a top executive told Automotive News.

China is the biggest export market for the Spartanburg, S.C., plant, which produces the popular X-series crossovers and employs about 10,000 workers.

The plant exported 73 percent of the 371,284 vehicles it produced last year. Nearly a third of that export volume was headed to China.

The two countries have ratcheted up automotive duties this year by way of retaliatory tariffs. The U.S. has imposed a 25 percent tariff on Chinese vehicles in addition to the 2.5 percent it normally levies. China lowered tariffs for all other countries to 15 percent but imposed an additional 25 percent retaliatory tariff on U.S. vehicles.

"Higher prices, higher taxes, higher tariffs ... will put some pressure," BMW of North America CEO Bernhard Kuhnt said at the Los Angeles Auto Show. "That is absolutely clear."

As vehicles become more expensive because of tariffs, it "will have an effect on the customer behavior," he said.

The U.S. fired the latest salvo last week, when U.S. Trade Representative Robert Lighthizer said he was examining all available tools to raise tariffs on Chinese vehicles to the 40 percent level China now imposes on U.S.-produced vehicles.

China has played an increasing role in BMW's crossover sales, said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book.

"With the bulk of these vehicles produced in Spartanburg, any tariffs that impact Chinese demand will also impact that factory and the economy of that region," Brauer said.

BMW is considering building more crossovers in China as the tariff war is expected to dent the German automaker's 2018 earnings by €300 million ($341 million), CFO Nicolas Peter said, according to Reuters.

"We will take a final decision in the coming weeks about which model to localize next in China," Peter said.