Porsche To Pass US Tariff And Brexit Costs Onto Customers

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Porsche manufactures its cars in Germany and exports them across the globe. It said that it would need to put surcharges on its vehicles in the United States of America if Washington decides to impose higher tariffs on cars imported from the European Union.

Today, Oliver Blume, the CEO of  Porsche stated: “At the very least we would need to pass on any higher tariffs to our customers in the form of price increases.”

He added: “That would not be very conducive to our sales. In 2018, 22% of our new vehicles were shipped to the USA.”

With regards to Brexit on the other hand, last February, it was reported that Porsche would consider adding a tariff surcharge amounting to 10 percent (in keeping with WTO tariffs) to purchase prices for customers in the United Kingdom in the event of a no-deal Brexit.

Today, the deputy chairman of the executive board, Lutz Meschke, said that Porsche had been examining the Brexit process from the start. He said that as the Brexit “song and dance” enters yet another round of uncertainty, the company is “bracing ourselves for everything” and has already “taken some precautionary measures, such as increasing stockpiles.”

He added: “If there were to be toll increases, which we all don’t know… I would assume there probably won’t be any toll increases for between one and two years.”

He said that he believes that the issue with the Irish border would not be quickly resolved.

He continued: “But if there are toll increases, we would need to decide how we deal with that, which part we could pass on to the customers and which not.”

Out of more than a quarter million cars that were sold by the company in 2018, more than 12,500 were sold into the United Kingdom. A 10 percent surcharge would raise the price of a Macan SUV by £4,600, as well as add at least £10,000 to its pricier models such as the 911.

Donald Trump, the President of the United States of America, has threatened to impose a tariff of up to 25 percent on cars imported from Europe. Currently, the European Union is waiting for his response to a US report on whether automotive imports from the bloc represent a threat to the national security of the United States. In 2017, cars imported from the European Union to the United States represented around €37 billion (£31.6 billion, $41.9 billion), with German carmakers making up the bulk.

Recently, Evercore ISI, a research firm, said that tariffs could cost Volkswagen approximately €2.5 billion (£2.1bn, $2.8 billion) per year. Herbert Diess, the CEO of Volkswagen, agreed, informing the Financial Times last month: “In the worst-case situation, that would probably be close to the real figure.”

Last year, Porsche reported a year-on-year rise of 4 percent in operating profit to €4.3 billion (£3.7 billion, $4.9 billion), and a 10 percent increase in sales revenue to €25.8 billion. It reported a 12 percent growth in deliveries to China, and a less robust 3 percent growth in deliveries in the United States. However, the sales growth in the United States in 2018 was nearly flat at only 17.3 million units.