That's around 13 percent of the expected earnings.
President Donald Trump wants to impose tariffs on cars imported to the United States from the European Union. That's the headline this week following Trump's talk with the EU about a new deal regarding trade.
“If we don’t make the deal we’ll do the tariffs,” Trump said on Wednesday. “We’re trying to make a deal. They’re very tough to make a deal with, the EU.”
With this move, though, automakers are to take much hit as the imposed tariffs would spell trouble to the company's profit. Case in point: the Volkswagen Group.
In a report by the Financial Times via the Automotive News, Volkswagen Group's CEO Herbert Diess said that the potential tariffs that will be imposed could cost the company up to 2.5 billion euros ($2.8 billion).
"It's becoming tense once again," Diess told the paper. "You know it's a pity because we can't solve it from the car industry. It's more of a tariffs negotiation between Europe and the United States."
The computation came from the London-based Evercore ISI. It said that the Volkswagen Group, albeit already having manufacturing plants in the U.S., could cost the automaker 2.5 billion euros ($2.8 billion) a year, about 13 percent of expected earnings if the new tariffs would be imposed.
Automotive News also cited that German brands would likely get hit by the proposed tariffs by President Trump. The Volkswagen Group sells VW, Audi, and Porsche in the U.S., while Mercedes and BMW regard the country as its second-largest market.
Of note, this isn't the first time that President Trump threatened to impose taxes for cars imported from Europe, and it's not far-fetched that this move would also increase the price tags of imported European cars. Even its homegrown brand, Ford, faces decreasing profits of up to $1-billion due to the increased taxes.
Source: Automotive News