Faced with US tariffs, competition
from China and climate rules at home, Europe's carmakers are
struggling with falling sales and profits. While Washington and
London have reached a first deal since US President Trump began
his global trade offensive, the European Union is still seeking
a transatlantic agreement to save one of its key industries.
US President Donald Trump has secured the first truce in his
global trade war, reaching a 'historic' compromise with the
United Kingdom (UK) last week. Just on Monday, he also agreed to
slash tariffs with China - but the European Union is still
negotiating to reach a compromise across the Atlantic.
Since his inauguration in January, Trump - a staunch
protectionist - launched sectoral tariffs of 25 percent on
steel, aluminium, and automobiles, as well as universal tariffs
of 10 percent on most other imports to the US.
In April, he paused special levies on imports from most trading
partners including the European Union for 90 days, prompting the
bloc to suspend its planned countertariffs to allow for further
talks.
The European Commission on Thursday however unveiled plans to
impose additional tariffs on US imports worth up to 95 billion
Euro if negotiations with Washington do not lead to a solution
to the trade conflict.
A list of targeted products published on Thursday covered
industrial and agricultural goods, including cars and car parts,
aeroplane parts, machines, and fuels, as well as livestock,
meats, fresh produce, chocolates, wine and other alcoholic
beverages.
"The EU remains fully committed to finding negotiated outcomes
with the US," said European Commission President Ursula von der
Leyen.
Carmakers have been among the hardest hit by the US president's
multi-pronged assault on free trade, with major brands -
especially in Europe's largest economy, Germany - grappling with
a loss of sales and profits.
According to the European Automobile Manufacturers'
Association's (ACEA) annual report, the EU exported some 750,000
vehicles worth 39 billion Euro to the US in 2024.
European carmakers in distress
At the end of April, Germany's Mercedes-Benz and US-European
group Stellantis, whose 14 brands include Jeep, Peugeot, Fiat,
Maserati and Opel, joined other automakers in suspending their
annual financial guidance because of uncertainty over US
tariffs.
Often referred to as 'earnings guidance', carmakers regularly
release information as an indication or estimate of its future
earnings. Uncertainty over the economic impact of the US tariffs
however led them to scrap their financial forecasts for this
year, underlining the chaos caused by Trump's fast-changing
trade tactics.
Mercedes cited "volatility with regard to tariff policies" that
meant business development could not be reliably forecast.
Mercedes-Benz and Volkswagen, Europe's biggest automakers,
reported big drops in their net profits over the January-March
period — before the US tariffs kicked in. Mercedes' net profit
plunged almost 43 percent in the first three months of the year
to 1.73 billion Euro.
Stellantis reported a 14-percent drop in its first-quarter sales
to 35.8 billion Euro.
In Spain, the case of Seat, one of the largest companies in
their automotive industry, stands out - however not because of
US tariffs, but because of EU tariffs on Chinese electric
vehicles (EV) that are still in place.
To combat heavy competition from the Chinese EV market, the EU
hit China with tariffs of up to 45.3 percent.
In February, Seat said that some 1,500 jobs in the company and
another 10,000 indirect jobs were at risk if the current EU
tariffs on the Cupra Tavascan, the EV that it manufactures in
China, were not lowered.
The decline in vehicle demand across Europe, above all in
Germany, also impacts car parts manufacturers and suppliers
across the continent.
Bulgaria does not make cars but plenty of Bulgarian companies
produce car components. The spring macroeconomic review of DSK
Bank published in late April warned of negative effects related
to trading partners in Germany and Italy which are directly hit
by the tariffs. This could result in a decline in parts orders.
The head of the Executive Board of the Association of Automobile
Importers in Bulgaria, Lyubomir Dorosiev, however told Bulgarian
news agency BTA in early April that the tariffs on EU-made
automobiles are good news for European consumers. In his
opinion, if European manufacturers are unable to export cheaply
to the US, they will gradually cut new car prices in Europe,
including in Bulgaria.
In North Macedonia, an EU candidate country, car parts suppliers
are also raising concerns about reduced orders, with some
experiencing drops of up to 30 percent. According to them, the
negative effects in Europe are reaching local suppliers of major
carmakers with a slight delay, and they fear that repercussions
on the country's economy will become even more severe if
economic challenges in Europe's largest economy, Germany,
continue.
Emission troubles
The EU also continues to face a dilemma between bolstering key
sectors - including automobile manufacturing - in the face of
fierce US and Chinese competition on the one hand, and reaching
longstanding climate goals on the other hand.
EU lawmakers last week gave the green light to a delay for
European carmakers to meet new emission targets, as the bloc
seeks to balance climate goals with supporting the struggling
industry.
Part of that effort includes loosening rules to give companies
breathing room, including the reprieve approved in Strasbourg by
a 458 to 101 majority of EU lawmakers.
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