(Repeat for additional subscribers)
June 14 (The following statement was released by the rating agency)
Fitch Ratings says that sales and earnings of some European auto manufacturers including BMW
, Daimler AG ('A-'/Stable) and Volkswagen AG's ('A-'/Positive)
Audi could be impacted by the reported trade dispute between the EU and China and
potential import tariff on premium vehicles. Other European groups have more limited sales in
China and, besides, should not be affected by this measure in light of their absence from the
However, we do not anticipate any immediate impact on ratings from this event if
it were to materialise. Daimler and Volkswagen have sufficient headroom in their
current ratings to accommodate a temporary and mild erosion of their
profitability. Nonetheless, a long-lasting and onerous additional duty could
have a heavier impact on profitability and in turn, on ratings.
China represents a material and critical source of earnings for BMW, Daimler and
Audi. Any decline of sales would have an impact on their profitability and cash
generation, as imported cars generate cash not trapped at the JV in China
contrary to sales of vehicles produced locally with a Chinese partner. Import
tariffs from China on US-built BMW X5 and Mercedes M-class had already hit these
groups in 2011.
An extra import duty would make German high-end cars even more expensive and
would likely deter some customers or make them choose a smaller engine or
version, for which profitability is lower. In addition, the majority of BMW's
and Daimler's imported cars include their high-end and most profitable vehicles
such as the 7-series and S-class. Overall, about half of BMW's and Daimler's
cars sold in China are imported. The rest of Volkswagen's brands' sales could
also be affected, although to a much lesser extent.
However, and depending on the final tariff rate if it were confirmed, we believe
that customers of the most expensive cars may not be materially affected by an
additional tax. Besides, such customers have no real alternative option in the
local market to purchase a premium car.
Several press reports in the past few days have commented about talks in China
to impose import duties on premium European cars following complaints of
"dumping" for cars with more than 2.0 litres engines sold in China.