A Tesla showroom in Corte Madera, California. Picture: AFP
A Tesla showroom in Corte Madera, California. Picture: AFP

Beijing/Shanghai — For BMW, Tesla and other global vehicle makers whose future is ever-more dependent on China’s burgeoning market, any gains from lower import tariffs this week will likely be short-lived — thanks to US President Donald Trump’s trade war.

After decades of pleading for easier access to the world’s biggest car market, manufacturers finally had duties on overseas imports almost halved to 15% on Sunday.

But the reprieve for producers of those models — if they are built in the US — is set to end in five days, when a retaliatory 25% levy makes them more expensive.

Trump’s tit-for-tat trade squabble with China threatens to undo years of lobbying by car makers and drag Europe’s leading luxury brands into the fray because of decisions that were made when global manufacturing and exporting were buzzwords.

Now the uncertain implications of a tariff whiplash are unnerving dealers and consumers in a country where a record 24-million vehicles were sold in 2018.

"It is a nightmare to have the 25% additional duty," said Wang Rongzhen, deputy general manager and an investor in Yan’an Jinchi Feike Auto Sales and Service.

The Yan’an Shaanxi-based dealership imports models, such as Fiat Chrysler Automobiles Jeeps from the US.

At Shanghai Aote Hung Car Sales, higher tariffs would just be another headache for sales manager Liu Yuanyuan, who said she was struggling to shift stock as consumers anticipate the typical summer clearance discounts.

Her dealership imports models, including those from Mercedes-Benz, Buick and Jaguar Land Rover.

"Most of the clients are waiting," Liu said. "After the trade war issue, many imported vehicles, such as Mercedes-Benz or BMW, especially the BMW X4, X5 and X6 manufactured in the US, are being affected. We are advertising that clients can buy cars at promised prices before July 6, but there are no guarantees afterwards."

Unless Trump backs down on July 6 the US will impose tariffs on $34bn of Chinese imports, many of them parts used in products, such as marine engines and power turbines. China will impose countervailing levies the same day — including on US-manufactured cars.

The vehicle tariffs will wipe out the July 1 reduction to 15% from 25% on all foreign car imports.

On Monday commodity powerhouse Australia delivered a warning that rising trade protectionism would hurt global growth, adding its voice to a chorus of alarm.

China’s retaliatory tariffs couldn’t have come at a worse time for foreign luxury-car makers.

The depreciating yuan is already making imported vehicles more expensive for local buyers.

Chinese equities have entered a bear market, further eroding domestic buying power.

"US car makers might need to brace for seeing their market share encroached as consumers increasingly favour domestic brands," said Liu Yuanchun, a professor at the National Academy of Development and Strategy at Beijing-based Renmin University of China.

The additional levies could trigger even more retaliatory measures.

Trump instructed trade officials in June 2018 to identify $200bn in Chinese imports for additional tariffs of 10% and said the US would impose duties on another $200bn if Beijing retaliated.

China vowed to hit back.

Amid the rising tension, car makers across the world are urging Trump’s administration not to impose tariffs of its own on overseas car imports.

South Korea’s Hyundai said duties would be "devastating".

General Motors, which imports vehicles from Mexico to sell in the US, warned it might shrink US operations and cut jobs.

Of China’s $51bn vehicle imports in 2017, about $13.5bn came from North America, including sales of models made there by non-US manufacturers, such as BMW.

China imported 280,208 vehicles, or 10% of total imported cars, from the US last year, according to China’s passenger car association.

Some US vehicle makers that preemptively lowered prices in China are now cornered.

A day after China announced cutting vehicle-import tariffs in May, Tesla lowered prices by about 6%.

That means the Model S sedan would cost between 710,000 yuan ($107,000) and 1.23-million yuan.

Andy Wu, who works at a trading company in Beijing, has been looking at buying a Tesla but now has second thoughts even after the recent discounts.

"I want to choose some accessories and customise some parts and they don’t really have a vehicle the way I want that’s already cleared customs before the new tariff gets in," he said.

"I’m going to wait for a while and see where this is going. Why would I pay 25% more but not get an upgrade in quality or a fancier brand?" Wu said. "If it’s bumped up to more than 800,000-yuan, why not buy a Porsche?"

Wang, the manager at Jinchi Feike, said car makers might be reluctant to reverse the price cuts after July 6 because they would find it more difficult to compete with European brands.

Even US vehicle makers that assemble vehicles in China, such as GM and Ford Motor, could be hurt by the July 6 tariff out of concern their cars would become more expensive to repair, he said.

Ford said it’s "essential that governments work together to lower, not raise, barriers to trade" and that it would maintain price cuts on imported Ford and Lincoln models announced in May.

BMW said its business model relied on global free trade. The German luxury-car maker expected "stronger" sales momentum in the second half of the year, with the launch of locally produced X3 model.

GM said it "has the philosophy to build where we sell. Virtually all the vehicles we sell in China are built in China and virtually all parts are sourced locally."

Tesla and Fiat Chrysler declined to comment. Mercedes-Benz’s owner Daimler did not respond to e-mails seeking comment.

Among foreign car makers, Tesla is particularly vulnerable to an increase in Chinese tariffs.

Unlike GM, Ford, BMW and Daimler, the Palo Alto, California-based company has no manufacturing plant in China.

Tesla has been working with Shanghai’s government since last year to explore assembling cars in China, but had yet to reach a definitive agreement.

Bloomberg