BMW, Porsche Lead Auto Stock Rout on Trump Tariff Fears

(Bloomberg) - BMW AG and Porsche AG led German automaker shares lower over concerns the US will hike tariffs on imported cars after Donald Trump returns to the White House.

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BMW, which reported disappointed quarterly earnings earlier Wednesday, fell as much as 7.5% in Frankfurt. Porsche, the maker of 911 sports cars, dropped to its lowest intraday value since the stock started trading more than two years ago. Shares of Mercedes-Benz Group AG and Volkswagen AG also declined.

Additional tariffs would hurt Germany's automakers, which send more vehicles to the US than to any other country. The market is increasingly lucrative for them because of robust demand for large sport utility vehicles and a slower shift to EVs than in Europe, allowing them to sell more of their higher-margin combustion-engine models.

Trump's election victory "marks the beginning of the most difficult economic moment" in Germany's post-war history, said Moritz Schularick, president of the Kiel Institute for the World Economy. "The country now faces massive foreign trade and security policy challenges for which we are not prepared."

Mercedes declined as much as 6.55%. Volkswagen, which owns brands including Audi, Lamborghini and Bentley, fell as much as 5.5%.

During his campaign, Trump had said he plans to slap duties on foreign-made cars shipped to the US to protect local jobs. A trade conflict with Washington would create yet another problem for the German manufacturers, which are already facing tough competition in China and muted demand in Europe.

"I want German car companies to become American car companies," Trump said during a speech in Savannah, Georgia in September. "I want them to build their plants here."

Most of them already have. German automakers operate several factories in the US where they produce cars both for local buyers and for export — meaning any European countermeasures could increase the fallout from a trade spat.

Volkswagen assembled around 175,000 cars at its plant in Chattanooga, Tennessee last year, including the Atlas and electric ID.4 models. The company says it has invested more than $4.3 billion in the site since 2009. Mercedes manufactures top-end SUVs at its plant in Tuscaloosa, Alabama.

While BMW is struggling with a costly recall that contributed to its lowest quarterly profitability in more than four years, the company may be best shielded from the fallout as most of the cars it sells in the US are built locally. Its largest plant is in Spartanburg, South Carolina — a factory it opened in 1994 where it makes its popular X-series of larger SUVs. It's prepared to produce more in the US if needed, Chief Executive Officer Oliver Zipse said Wednesday during a call with reporters.

Combined, German carmakers and suppliers to the industry employ around 138,000 workers in the US, according to Germany's VDA carmaker lobby.

"The German automotive industry has been present and successful in the US for decades," said VDA President Hildegard Müller. "Germany, just like Europe, now needs a strong and unified voice."

-With assistance from Wilfried Eckl-Dorna and Monica Raymunt.

(Updates with analyst comment in fourth paragraph.)

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