BMW (ETR:BMW) have announced they will raise prices for their SUV models for consumers in China.
The price spikes come after China’s retaliatory tariffs, which add a 25% levy on all US-made vehicles and thus affects the BMW’s sold in China, which are produced at BMW’s factory in South Carolina. The tariffs have led to BMW increasing the prices of their X5 and X6 SUV models by 4% and 6% respectively.
While price increases will soften the impact of the tariffs on BMW’s profit margins, most of the cost is still being borne by the firm. China is the fastest-growing automotive market in the world, with US-made BMW sales to CHina finishing at over 100,000 models in the last year alone. Thus, absorbing some part of the cost caused by tariffs has been deemed necessary so that BMW can maintain competitive prices. Following the news, a BMW spokesperson confirmed that the prices of other models, including the BMW X4 SUV, will remain “largely unchanged”.
This comes after other firms such as Mercedes and Ford announced similar plans to attempt to absorb most of the extra costs incurred by tariffs. Trade delegates from different nations are now set to meet in Geneva to discuss the long term impacts of the tariffs on the auto industry, as well as discussing the ‘Section 232’ Investigation ordered by President Trump.
“The meeting is meant to bring together major auto producing nations so we can discuss our concerns over the US Department of Commerce’s Section 232 investigation of automobiles and parts,” a Canadian government official told Reuters.
BMW and other auto retailers have already suffered, with tariffs affecting the European auto market. Going forwards, they will be keen to minimise the effects of tariffs on their foothold in emerging markets, as well as ameliorating the uncertainty posed by ongoing Brexit negotiations.
In more positive news, BMW followed news on price increases with the announcement of successful integration of Amazon Alexa technology into their 2018 models. After negotiations with Amazon and trials of the software in the computer system of their X5 SUV model, BMW will now produce Alexa-enabled models in the US, UK, France and Germany, with the aim of expanding and eventually incorporating other software such as Cortana and Google Assistant.
BMW shares are currently trading at 82.70 EUR, down 0.25% or 0.21 EUR since trading began this morning.