Ever since the trade war and resulting tariffs between the US and China began several months ago, automakers had to react in order to protect their business interests. BMW is no exception. Although its Spartanburg, South Carolina production plant, home to the X3, X4, X5, X6, and X7, has been a huge success story, the trade conflict between America and China could have a negative impact.
According to Reuters, BMW is only a few weeks away from making a decision regarding building more SUVs in China in order to minimize the damage of lost revenue. Those tariffs are expected to hurt the German automaker’s 2018 earnings by around $344 million.
The most obvious solution to fixing that for 2019 would be to increase SUV production, specifically the X3, in China to avoid those tariffs entirely. “We will take a final decision in the coming weeks about which model to localize next in China,” Chief Financial Officer Nicolas Peter said.
In fact, Peter also noted that X3 sales have actually increased ever since BMW began producing it in Asia as well. It no longer needs to rely so much on export from the US. Would BMW’s decision to shift more X3 production from the US to China hurt American jobs? Unknown. But again, BMW needs to look out for its greater interests and all the more so when it involves one of its best-selling models.
If it costs some jobs at one factory then so be it. “If the tariffs undermine the competitiveness of BMW production and sales in the US, the result could be strongly reduced export volumes with negative effects on investments and jobs in the US,” according to BMW spokesman Kenn Sparks. The X3 is not the only volume seller that could see a partial production shift to China; the X5 is also a candidate.
Earlier this year BMW stopped exporting the X3 from the US to China, so this whole tariff war thing is very real. Just last month, BMW announced it was spending $4.2 billion to take full control of its main joint venture in China, a clear-cut sign the automaker will soon become less reliant on Spartanburg.
In 2017, Spartanburg built over 370,000 SUVs and more than 270,000 of those were exported to China and other overseas markets. Spartanburg should be okay in the immediate future thanks to increased US demand for SUVs and the all-new X7, of which it will be the sole producer. Nevertheless, Spartanburg’s star status has just taken a hit.