US Tariff Strangled, European Luxury Cars Raise Prices And Consumers Get Ready To Spend Deeper

Vanquish Volante. (Photo: Aston Martin)

JAKARTA - European luxury car manufacturers such as Porsche and Aston Martin have taken significant steps by raising prices in the United States. This move could be a signal for larger brands to follow immediately, along with the company's efforts to charge consumers new tariff fees.

The new trade agreement between the United States and Europe has indeed been agreed upon, in which European Union-made cars will be subject to a 15 percent tariff starting in August. Despite lower than the initial threat, this figure far exceeds the 2.5 percent tariff before US President Donald Trump launched his trade offensive this year.

On Wednesday, July 30, Reuters reported, a luxury brand owned by Volkswagen, Porsche, announced a price increase in the US from 2.3 percent to 3.6 percent in July. It was also stated that they did not plan to set up production facilities in the US to avoid levies.

Porsche CEO Oliver Blume, confirmed that this situation was not a storm that would pass. The company even cut its full-year profit target and reported a loss of $462 million due to fares in the first half of this year.

In line with Porsche, British sports car manufacturer Aston Martin, has also made gradual price increases in the United States since last month. The company issued a profit warning based on the impact of US tariffs and the continued pressure on Asian demand.

Impact Of Tariffs Strangled Global Automotive Giants

The US rate has hit global automakers hard. Major companies such as GM, Volkswagen, Hyundai, and Mercedes-Benz have recorded billions of dollars in losses, issued profit warnings, cut forecasts, and raised prices.

In fact, Ford Motor, which produces about 80 percent of its vehicles in the US, also reported a loss of USD 800 million in the second quarter due to tariffs, and estimated higher US levies would cost more than expected throughout the year. Meanwhile, Japanese automaker Nissan reported a quarterly loss of USD 535 million on Wednesday, which was affected by US tariffs, restructuring, and lower sales volume.

Although other major automakers are still delaying, other sectors have seen price increases as companies are trying to charge additional fare fees. Analysts estimate that larger automakers can take similar steps in the second half of this year.

"Towards the second half of this year, we will get additional visibility regarding Mercedes-Benz and other premium OEM capabilities to raise prices in the US to offset the tariff impact," JP Morgan said in a note.

European automakers are also increasingly optimistic that they can achieve a specific reduction in additional sector rates, and are resigned to facing a 15 percent tariff.

Mercedes CEO Ola Kaellenius told analysts the group assumed the tariff would remain at 15 percent, denying hopes that there would be negotiations on individual deals.

"For all intents and purposes, a global agreement for now is that," said Kaellenius, who is also president of the European car lobby ACEA.

Even Blume, who also serves as head of VW, agrees with Kaellenius.

"I agree with Ola Kaellenius' assessment that there will be no separate automotive agreement," he said.

This indicates that European auto giants have accepted the reality of new rates and are preparing for their impact.