Features
31 juil 19

How would US/EU Car Wars impact on True Fleets? 

Donald Trump has a point: the EU is treating the US car industry unfairly. Could European cars fall victim to the escalating trade war between the US and the EU? 

Let's go straight to the data, shown on this map. Last year, the European Union exported more than 1.15 million cars to the United States. That's more than four times the volume that came the other way: in 2018, the US exported just 267,000 cars to the EU.

Sales disparity

The disparity is even greater when we consider the value of both export streams. European cars sold in the US last year represented a combined value of $43.1 (€38.7) billion. That's more than six times the value of the American cars sold in the EU over the same period: $6.3 (€5.7) billion. 

While there are many elements that explain the disparity in sales – general market preferences for or against certain model types and the EU's stricter emissions norms, to name just two – it certainly is true that the difference in tariffs plays some part. 

Extra burden

The United States currently imposes a tariff of just 2.5% on European cars imported into the country. The other way around, the EU charges 10% on American cars coming to be sold in Europe. That difference clearly imposes an extra burden on US cars on sale in Europe, compared to European cars on sale in the US. 

However, that burden is reversed for larger vehicle categories like SUVs and pick-up trucks: here, the EU's tariffs on US imports are still 10%, but the US charges a tariff of 25% instead of 2.5% - giving the Americans the advantage. 

Unfair treatment

Nevertheless, cars are the more important volume category, and US president Donald Trump has repeatedly criticised the EU for what he considers unfair treatment, threatening to raise the US tariff on cars imported from the EU from 2.5% to 25% (as for SUVs and pick-ups). 

While this has not happened yet, it's easily conceivable how Europe's car industry could fall victim to the trade dispute between the US and the EU which – although less harsh than the one between the US and China – has been slowly escalating over the past few months. 

Airline subsidies

US-EU trade tensions originated with a dispute over airline subsidies, with both sides accusing each other of unfairly subsidising Boeing (US) and Airbus (EU). The dispute has led to the US imposing higher tariffs on steel and aluminium from the EU, with the EU reciprocating by raising tariffs on 'typically American' products like blue jeans, bourbon and Harley Davidson motorcycles. 

Early in July, the US proposed new tariffs on imports from the EU worth $4 billion per annum, including meat, cheese, pasta and coffee. Those tariffs would be added to a list of more than 300 products worth $21 billion in annual imports, already proposed in April. 

Proposed solution

Because European car exports to America are worth more than the other way around, the EU (and in particular its biggest car-manufacturing country, Germany) has more reason to fear an escalation of tariffs on this particular industry. 

That's why Peter Altmaier, Germany's Economy Minister, last week proposed a solution that would potentially benefit the automotive industry on both sides of the Atlantic: drop the tariffs on American cars imported into the EU to zero – but only as part of a broader tariff agreement; i.e. with similar privileges for European cars imported into the US. 

US Top 10

As Dataforce’s Top 10 of True Fleet brands and models in the United States in 2018 indicates, the success of European brands on the American market does not translate into a noticeable presence on the True Fleet market. 

Rank Brands Models
1 Ford Ford F-150
2 Chevrolet Ford Explorer
3 Toyota Chevrolet Silverado
4 Jeep Jeep Grand Cherokee
5 Honda Chevrolet Equinox
6 Nissan Ram 1500
7 GMC Nissan Rogue
8 Ram Ford Escape
9 Dodge Jeep Cherokee
10 Mercedes Toyota RAV4

Six brands of the ten top brands are American, three are Japanese. Mercedes is the only European brand, in 10th place. 

As for specific models, American True Fleets show a strong preference for locally-built ones – all but the Equinox, made in Mexico, are manufactured in the US. 

Mercedes is an interesting example, as it is both the biggest loser of the US/EU trade conflict, and its biggest winner. 
 
For the German brand, the tariff issue cuts both ways: its A, B, CLA, E and S Class sold in the US all need to be imported from Europe. On the other hand, Mercedes also has a factory in Tuscaloosa, Alabama where the locally popular SUV models GLE and GLS are built. These in turn need to be imported into Europe. 

It’s a similar story for BMW, which builds X3, X4, X5, X6 and X7 models in Spartanburg, South Carolina. Because the first three are quite in demand in Europe as well, it’s not impossible that production for the X3/X4 will be shifted back to Europe. 
 
EU Top 10

The corresponding Top 10 of most popular models in the EU’s True Fleets shows a similar phenomenon: local preference. All models are built in the EU, and apart from the A Class, none are exported to the US. 

Rank Models
1 Volkswagen Golf
2 Renault Clio
3 Volkswagen Polo
4 Skoda Octavia
5

Volkswagen Tiguan/Tiguan Allspace

6 Peugeot 208
7 Ford Fiesta
8 Peugeot 3008
9 Mercedes A Class
10 Opel Corsa

The VW Tiguan and VW Golf for the US market are built in Mexico. That’s also where the Tiguan Allspace is assembled and shipped to both the US and Europe. The other models in the Top 10 are not even available on the America market. 

With local brand and model preferences strong for True Fleets on either side of the Atlantic, an automotive chapter in the trade war between the EU and the US would not immediately have a strong impact on the availability or the sticker price of their preferred models. 

If, however, the trade war is ultimately resolved along the lines proposed by Peter Altmaier, the effect would not just be to even out the imbalance between EU and US car exports (if only partially), but also to widen the pool of available, affordable models for True Fleets. Perhaps the additions would be attractive enough to create a more cosmopolitan mix of preferred True Fleet models, both in Europe and America. 

Main image: Statista / Creative Commons

Authored by Frank Jacobs and Dieter Quartier

Authored by: Frank Jacobs