On March 5, President Donald Trump gave automakers a special one-month exemption from tariffs on goods originating from Mexico and Canada, which had been implemented the day before.
Under the carveout made at the behest of Detroit’s Big Three automakers, vehicles that comply with the United States-Mexico-Canada Agreement (USMCA) will temporarily be exempt from the cross-border levies.
During the press briefing the same day, White House press secretary Karoline Leavitt said that the President told the CEOs of Ford (F) , General Motors (GM) and Stellantis (STLA) that they would have “to start investing, start moving—shift production here to the United States of America, where they will pay no tariff.”
However, the Big Three isn’t the only car companies feeling the danger of Trump’s grand plans for the auto industry.
An employee works on a Volkswagen vehicle at its factory in Puebla, Mexico
Das Auto Tariffs
In a recent report by Reuters, the CEO of Volkswagen Passenger Cars (VLKAF,) Thomas Schäfer, noted that increasing production at its Chattanooga, Tennessee plant to comply with President Trump’s tariff rules is not a realistic endeavor for the company.
The one-month tariff exemption for USMCA-compliant vehicles is set to expire on April 4.
“We need a little bit more time if we had to do that, but for now, we are watching the situation, and we are doing backup plans for long-term solutions,” Schäfer said during its 2024 Brand Group Core Media call on March 13.
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Under the USMCA rules, imported cars crossing into the U.S. from Canada or Mexico must be built with at least 75% of their parts originating in North America (U.S., Canada, or Mexico) to qualify for tariff-free border crossings. Otherwise, they face a 2.5% levy.
At its Puebla, Mexico plant, Volkswagen builds the compact Jetta sedan, the small Taos crossover SUV, and the compact Tiguan crossover SUV for export to the States. According to its Q4 and year-end 2024 sales figures, the output of the Puebla factory made up roughly 60% of its 2024 U.S. sales.
During the call, VW brand CFO David Powel said that Volkswagen has not made any adjustments or shifts to Mexican production yet, as it is currently monitoring the situation.
“With a view to the unclear and unstable situation of imports into the U.S., we have not done any readjustment of the distribution of our cars — we are observing the situation,” Powel said during the call.
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Other VW Group brands teased shifting to US production
Volkswagen is not the only automaker affected by the shifting tariff rulings. Its compatriot, BMW, is also facing a unique tariff situation brought on by the new policy.
However, the latest report comes after German business publication Handelsblatt reported that other VW Group brands like Audi and Porsche may be considering moving production to the United States.
The report did not mention which specific Porsche or Audi models would be built in the U.S., but the two luxury brands are somewhat exposed.
Porsche makes almost all of its cars in Germany, while Audi makes its vehicles in various places outside of Germany, except for the United States. Its top-selling vehicle in the States is the Q5 crossover SUV, which is currently made in San José Chiapa, México, for the U.S.
Volkswagen AG is traded on OTC markets in the United States as VLKAF and on the Frankfurt Stock Exchange under the ticker VOW.
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