Toyota emerges as winner in tariff war, for now
BMW and Tesla struggle as levies raise hurdles to China market
YU NAKAMURA and KOSEI FUKAO,
Nikkei staff writers - August 03, 2018
SUZHOU, China/FRANKFURT --
Toyota Motor enjoyed a powerful tailwind in China last month as rivals BMW and Daimler took a serious hit from the escalating trade war between Washington and Beijing.
The Japanese automaker said Thursday its July unit sales in China rose 17% on the year to 127,400 units, marking a monthly record and a fifth straight month of growth.
Its Lexus luxury brand soared 37.5% to around 15,000 units. Toyota ships all Lexus models sold in China -- such as the LS, ES and RX -- from Japan.
China in May decided to lower tariffs on imported passenger vehicles to 15% from 25% in a nod to the Donald Trump administration's call to reduce its trade surplus with the U.S.
The cut took effect July 1, and Toyota lowered prices of 10 Lexus models the same day, by 27,000 yuan ($3,945) on average.
The Toyota brand, much of which is produced in China and therefore unaffected by the tariff change, also fared well. Corolla sales rose 10% to 34,100 units and the Levin compact sedan gained 22% to 16,900 units. The RAV4 sport utility vehicle ascended 29% to 12,300 units.
Meanwhile, BMW suffered as China raised tariffs on U.S.-built autos to 40% from 15% on July 6 as retaliation against a U.S. tariff increase on Chinese goods. The company said the Chinese levy hike will cost it nearly 300 million euros ($348 million) in 2018.
The German automaker ships more vehicles from the U.S. to China than any other big automaker -- nearly 100,000 units in 2017.
BMW recently raised prices of U.S.-made sport utility vehicles in China -- by 4% for the X5 and 7% for the X6. The company has been shipping the X5 from Thailand since 2016, and likely will amp up that sourcing going forward.
CEO Harald Krueger said at a recent earnings event that the company produces 80% of its Chinese offerings locally and will work to minimize the impact of the tariff increase.
Daimler has been on a rollercoaster ride as the trade war shakes up the world's largest auto market. Many consumers in China held off on vehicle purchases between April and June in anticipation of the July 1 tariff cut to 15%. As the market slowed, Daimler was forced to lower prices during that period. But the 40% tariff hit the company July 6, as Daimler ships popular SUVs from the U.S. to China.
The company is expected to raise prices to pass on the cost increase at least partially. It expects to sales to slow, and profit may suffer as the impact would not be fully absorbed by the price increase.
American electric vehicle specialist Tesla has raised prices by 20% to 30% to reflect the heavy tariff on its vehicles shipped from the U.S.
Imports account for about 1.25 million of the nearly 30 million units of new autos sold in China per year. The trade war is forcing automakers to revisit their China strategies.