Audi Is Going To Raise Prices, It Just Doesn’t Know By How Much

Audi says it is considering « the extent to which we will have to pass on at least some of the tariffs to our customers in the form of price increases, » according to Reuters. The brand is looking to find the « sweet spot » between price increases and adjusting production as the Trump administration keeps up its trade wars with Canada, Mexico, and the auto industry.
The problem Audi has is that it has no factories in the US and its most popular import into the US is the Audi Q5, which comes in from Mexico. The other problem is that President Trump keeps changing tack on tariffs, making planning difficult. In March, he agreed to exempt automakers for a month from the extreme 25% tariffs on Canada and Mexico, assuming the automakers complied with existing free trade rules.

Audi

Audi is a German automaker that produces a range of luxury vehicles that combine sporty driving dynamics with the latest technology. Its history goes back over 100 years and includes both production cars and a rich racing heritage. Now owned by the Volkswagen Group, Audi rivals BMW and Mercedes with a range of luxurious sedans and SUVs in all the core premium segments.

Founded

1909

Founder

August Horch

Headquarters

Ingolstadt, Germany

Owned By

Volkswagen Group

Current CEO

Gernot Döllner

Options In An Ever-Changing Economic Landscape

Automakers have a few options to deal with the added costs, including raising prices and lowering output to shifting production – whether that’s to new or existing factories in the US or from countries that aren’t (yet) being targeted for tariffs. Mercedes-Benz production chief Joerg Burzer says that the brand may even import vehicles from South Africa, which currently has duty-free access to the US.
Mercedes is holding out on making plans for its GLB model, which comes from Mexico to the US, until it sees how competitors respond to the tariffs. « Of course, that could change any day, » Burzer added. « I have never seen such a complex environment… the key competence you need today is flexibility. »

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BMW is the other direct competitor, and doesn’t comply with those existing free trade rules. Ironically, BMW primarily builds its X5 models here in the US and exports them around the world and has been a target of President Trump before. BMW is one of the largest exporters of cars from the US, with billions of dollars worth of cars coming from its South Carolina Plant – also its largest plant in the world. BMW says it will cover the costs of the tariffs for the next few weeks while waiting to see how long they will last.

Seeking Clarity That Likely Won’t Come

« There are numerous plans lying in drawers, so one can take action when necessary, » Jan Mischke, partner at the McKinsey Global Institute, told Reuters, adding carmakers were waiting to pull the trigger until they had clarity. However, they could be waiting an awful long time.

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The European Union and the US government are still in talks to seek a solution over what Trump calls « reciprocal tariffs », which could lead to added duties on imports from the EU. The only clear thing right now is that the cost of cars is going to go up.

Source: Reuters