Jorn Maddslien
Journalist
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Large American vans are difficult to browse the old and narrow streets in Europe
Donald Trump threatens to introduce major prices on EU car imports, unhappy that Europeans do not buy more American vehicles. But why the American cars, with the notable exception of Tesla, no more popular in Europe?
The old Italian cities, with their narrow and paved streets, offer an obvious explanation why, in the words of the American president Donald Trump, the Europeans “do not take our cars”.
Or as the analyst of the automotive industry Hampus Engellau says: “Try to go around Italy in a large SUV. I did it, and it’s very difficult”.
Add a cost to the question, and it obviously becomes why you do not see too many American van on European roads, observes Mike Hawes, CEO of the Society of Motor Manufacturers & Traders, which represents industry in the United Kingdom.
“We tend to have higher fuel prices than the Americans, we therefore prefer smaller and more economical vehicles in fuel, while they generally prefer the biggest vehicles.”
Mr. Engellau, who works for the Swedish investment bank Handelsbanken capital markets, also stresses that petrol prices are considerably cheaper in the United States. “They pay by Gallon what we pay by liter,” he said. There are 3.8 liters to an American gallon.
However, these differences have done nothing to dissuade European car manufacturers from obtaining market share in the United States. Again, in the words of Mr. Trump, the United States has “millions of cars arriving – BMW, Mercedes, Volkswagen and many others”.
In 2022, 692,334 new cars manufactured by the EU were exported to the United States, worth 36 billion euros ($ 37 billion; £ 30 billion). While only 116,207 new cars manufactured in the United States went in the opposite direction, for 5.2 billion euros.
This imbalance is caused by unfair negotiation rules and must be corrected, according to Trump.
“Mr. Trump is concerned because the terms of the exchange are not really equal,” said Englau, stressing that 10% EU prices on cars imported from the United States far exceed the rates 2.5% as the United States – currently – invoice on cars imported from cars imported from the EU.
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Small cars are much more popular in Europe than in the United States
These disparities prompted Trump to say that he wants to increase American prices on European automobile imports. It has already announced 25% of import prices on steel and aluminum imports, two crucial metals for car manufacturers.
Trump’s decision seems to have encouraged EU officials to consider reducing their own prices to protect the European automotive industry from a potential trade war.
Trump’s intervention did not impress Jim Farley, the boss of the American automaker Ford. “So far, what we have seen is a lot of costs and a lot of chaos,” NBC News said recently.
In fact, the emphasis on trade is perhaps moved, according to the veteran of the automotive industry Andy Palmer, former director of the Nissan and CEO of Aston Martin, and currently a consultant. “If you can help him, you don’t want to ship cars around the world. These are large boxes of expensive air,” he said.
The automotive industry is global, adds the SMMT MR Hawes, so car manufacturers generally want to “make near the place where the customer is based”.
As such, several European car manufacturers, including brands such as BMW, Mercedes and Audi, make some of their largest cars in North America, and some of these vehicles are exported to Europe.
American manufacturers have historically pursued similar strategies in Europe. General Motors owned and manufactured European brands such as Opel / Vauxhall and Saab, but she sold the first in 2017 and closed the second in 2009.
Meanwhile, Ford unloaded Aston Martin in 2007, Jaguar and Land Rover in 2008 and Volvo in 2010.
After years losing money, Ford is currently redirecting its European activities to electric and commercial vehicles and far from affordable small cars, such as its development models.
Ford plans to reduce 800 jobs in the United Kingdom and 2,900 jobs in Germany by 2027, which represents a 14% reduction in its European workforce by 28,000 people.
Tesla d’Elon Musk has a factory near Berlin in Germany, where he manufactures his cars of model Y for the European market, but even here, there are opposite winds as Chinese importing at low cost in particular their share of the European market for electric cars develop.
Europe is a very difficult market for car manufacturers. “You must have the right products and you have to manage the manufacturing factories well.”
He also underlines that brands have a competitive advantage in their country of origin, whether BMW, Mercedes, Volkswagen and Audi in Germany, Peugeot, Citroen and Renault in France, or Fiat and Alfa Romeo in Italy.
“There is a natural inclination for people to buy local champions, in particular in Germany, in France and Italy,” explains Mr. Asumendi.
He adds that if other European countries are more open to different brands, the market is crowded, with a multitude of Japanese cars, from South Korea and, more and more Chinese.
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Andy Palmer, veteran of the automotive industry, says that automobile prices stifle innovation
Adding to the complexity of Europe for overseas car manufacturers is different tax regulations and the need to communicate in many different languages.
Mr. Palmer does not think that “European customers have special objections to American cars”, and Mr. Asumendi agrees. “I think Europeans like American brands, but there are many other brands available in Europe, so competition is fierce,” he said.
Mr. Trump’s ambition is to make the American automotive industry stronger, bringing more production and innovation home. But Mr. Palmer insists that a trade war with Europe will not deliver him.
Not the least, he says, since the prices tend to “isolate beneficiaries of the free market, and this makes them simply lazy, so that they stop innovating and does not remain competitive”.
“It is not a matter of trade,” adds Mr. Palmer. “These are investment and collaboration.”
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