The German-based company stated that it will increase the prices of two of its most popular SUV’s in China. The decision came into effect after China put taxes on imports of American products. As per sources, the prices are expected to hike by 4% and 7% on its X5 and X6 SUV models from 30th July. China is a giant car market and BMW has sold more than 560000 cars there in the past year.
China placed new taxes on American made imports in response to US measures on $34 billion of Chinese exports. Following Tesla, BMW is now the second largest auto company to hike prices in China. BMW generated about $2.4 billion in sales last year by exporting about 80000 cars from its manufacturing plant in South Carolina to China. The plant in South Carolina is the biggest BMW plant in the world and has more auto exports than any other manufacturing plant in the US.
BMW also builds cars in China through a joint venture with a local company Brilliance Automotive whose vehicles are not subject to import taxes. Due to the increase in demand for vehicles, BMW had plans to increase the production in China and had stated that there would not be any reduction in the South Carolina production because of expansion plans in China.
Several companies have taken different measures to manage the increased import taxes. Tesla has raised the prices of its vehicles by 20% in China. Daimler has said that the hike in import taxes will surely affect its profit share, but those charges would not be simply borne by the customers. Ford has released a statement that it is not planning to impose the increased taxes to its buyers in China and will not change their prices.
If the increased tax on imports remains for a longer tenure, BMW might have to move SUV production from America to Europe where the exports to China have lesser duties.