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Why don't Europeans buy more American cars?

Published 4 weeks ago3 minute read

In fact, the very focus on trade is perhaps misplaced, according to automotive industry veteran Andy Palmer, formerly the chief operating officer of Nissan and CEO of Aston Martin, and currently a consultant. "If you can help it, you don't want to ship cars around the world. They're big boxes of expensive air," he says.

The automotive industry is global, adds the SMMT's Mr Hawes, so carmakers generally want to "manufacture close to where the customer is based".

As such, several European carmakers, most notably marques such as BMW, Mercedes and Audi, are making some of their largest cars in North America, and some of these vehicles are exported back to Europe.

US carmakers have historically pursued similar strategies in Europe. General Motors owned and manufactured European marques such as Opel/Vauxhall and Saab, but it sold the former in 2017, and shut the latter back in 2009.

Meanwhile, Ford offloaded Aston Martin in 2007, Jaguar and Land Rover in 2008, and Volvo in 2010.

After years of losing money, Ford is currently redirecting its European business towards electric and commercial vehicles and away from small, affordable cars, such as its Focus models.

Ford plans to cut 800 jobs in the UK and 2,900 jobs in Germany by 2027, which represents a 14% reduction in its 28,000-strong European workforce.

Elon Musk's Tesla has a factory near Berlin in Germany, where it makes its Model Y cars for the European market, but even here there are headwinds as low-cost Chinese imports in particular see their share of Europe's market for electric cars grow.

Europe is a very tough marketplace for carmakers, according to Jose Asumendi, head of European automotive research at JP Morgan, an investment bank. "You need to have the right products, and you need to run the manufacturing plants well."

He also points to brands having a competitive advantage in their home countries, be it BMW, Mercedes, Volkswagen and Audi in Germany, Peugeot, Citroen and Renault in France, or Fiat and Alfa Romeo in Italy.

"There's a natural inclination for people to buy local champions, especially in Germany, France and Italy," explains Mr Asumendi.

He adds that while other European countries are more open to different brands, the market is crowded, with a slew of Japanese, South Korea, and, increasingly, Chinese cars.

Getty Images Car industry veteran Andy PalmerGetty Images

Car industry veteran Andy Palmer says that car tariffs stifle innovation

Adding to Europe's complexities for overseas carmakers are different taxation regulations, and the need to communicate in many different languages.

Mr Palmer does not think "European customers have any particular objections to American cars", and Mr Asumendi agrees. "I think Europeans do like American brands, but there are many other brands available in Europe, so competition is fierce," he says.

Mr Trump's ambition is to make the US car industry stronger, by bringing more production and innovation home. But Mr Palmer insists that a car trade war with Europe will not deliver this.

Not least, he says, since tariffs tend to "insulate the beneficiaries from the free market, and this merely makes them lazy, so they stop innovating and fail to remain competitive".

"It's not about trade," adds Mr Palmer. "It's about investment and collaboration."

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