German carmakers are holding their breath for the next Trump tariff announcement to see if USMCA local content rules will necessitate higher prices and production adjustments in North America.
The Trump administration is currently applying 25% tariffs on the import of vehicles from carmakers in North America that do not comply with the local content requirements of the US-Mexico-Canada Agreement (USMCA) on trade.
Even those that are complying were only granted a month suspension on import tariffs earlier in March after Trump initially imposed a blanket fee on all vehicle imports. Tariffs are also applying to parts and materials, including steel and aluminium.
The political and trade turmoil has left the automotive industry in disarray, with many OEMs and their suppliers waiting to see what impromtu legislation April will bring from the US.
Among those are Audi and BMW, neither of which complies with USMCA rules on local content for production in Mexico. Under the USMCA trade deal instituted by the first Trump government back in 2020 regional value content (RVC) for passenger vehicles and light trucks is set at 75% and 70% of main components must be locally sourced within North America to comply for free trade.
Local content
While BMW does make vehicles at its US plant in Spartanburg – its biggest plant globally – Audi does not have a production base in the US. Unsurprisingly, both carmakers are emphasising the importance of free trade and the reciprocal dismantling of tariff and non-tariff barriers between the US, Canada and Mexico, as well as China and Europe. That is the right way to secure prosperity, jobs and growth, according to both Audi and BMW.
One measure Audi has included in its strategic monitoring and supply chain resilience management is the increase of the local share of value-added parts and the carmaker said it is contact with its supplier partners to apply a local-for-local approach where necessary.
However, Audi’s current supply chain does not meet the stipulations of the revised Nafta deal under USMCA and that includes Audi Q5 production at the San José Chiapa plant in Mexico. The Q5 and Q5 Sportback are exported to the US, where there is good demand, as well as to other global markets. A spokesperson for the carmaker said that revisions to the USMCA are expected in mid-2026 and Audi could adjust its supply chain to comply then.
“This is possible in principle for future projects, so we are keeping a close eye on further developments,” said the spokesperson. “However, vehicles from the Mexico plant benefit from numerous other Mexican free trade agreements, for example, with the EU or UK.
It is not clear how Audi will absorb the higher cost of exporting the Q5 to the US before mid-2026, what it will be mean for the sticker price at dealerships in America in the interim or how this will affect finished vehicle logistics planning. The carmaker said earlier this week that it is considering the extent to which it will have to pass on some of cost of the tariffs to its customers and seeking to balance that with adjustments to production.
Impact on profitability
BMW does not comply with the USMCA for vehicles produced at its San Luis Potosí plant in Mexico. Engines for the 3 Series, the BMW M2 and the BMW 2 Series Coupé, are imported from Germany. BMW’s spokesperson said that if the 25% tariff on vehicle imports stays in place it will be one the carmakers affected and it was “assessing potential implications”, which again could include higher prices at the dealers and adjustments to production in Mexico.
At the same time, BMW has made developing the local supply chain a pillar of BMW’s regional growth providing enhanced flexibility and resilience, according to Oliver Hasse, BMW’s senior vice-president for purchasing, quality and supplier network in the Americas. Hasse spoke to Automotive Logistics in February.
BMW acknowledges the current volatile and complex tariff situation in North America, including the link between tariffs and USMCA compliance.
“Our position remains unchanged,” said the spokesperson. “Free trade, which has always been a guiding principle for the BMW Group, is of immense importance worldwide. It is one of the most crucial drivers of growth and progress. Tariffs, on the other hand, hinder free trade, slow down innovation, and set a negative spiral in motion. In the end, they are detrimental to customers, making products more expensive and less innovative.”
In terms of BMW profitability, at the latest BMW earnings report, Walter Mertl, board member for finance at BMW, said the total impact of the tariff increases in place as of March 12 amounted to approximately 1 percentage point on the BMW’s Auto EBIT margin. As a result, the EBIT margin is now expected between 5-7% and consequently, return on capital employed in the Automotive segment should be within a range of 9-13%.
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