In recent news, BMW’s Chief Financial Officer, Walter Mertl, has expressed concerns over the European Union’s (EU) investigation into subsidies for China-made electric vehicles (EVs) exported to Europe. Mertl warns that such an investigation could potentially do more harm than good, leading to a significant backlash from Beijing. As China represents the largest market for Germany’s top three carmakers, this investigation could have far-reaching consequences for BMW and other European car manufacturers.

Potential Backlash from Beijing

Mertl emphasizes that he does not support punitive tariffs and believes that the EU investigation will not only shield those with insignificant sales in China but also impact every carmaker doing business in the country. He draws attention to the potential backlash from China, highlighting that it could be greater than anticipated, likening it to a boomerang effect. This retaliation could have severe implications for European carmakers, including BMW.

China’s Importance to German Carmakers

China’s significance as a market for German carmakers cannot be overstated. BMW, for instance, exports the iX3 from China to Europe and plans to export the Mini from next year. This leaves the company exposed to potential EU tariffs on imports from China, as well as any retaliatory measures China may take against its sales in the country. While the majority of BMW cars sold in China are produced locally, some materials are still shipped from Europe.

China’s Reaction to the EU Investigation

China has strongly condemned the EU investigation, which officially commenced on Thursday. The Chinese government argues that the investigation is inconsistent with World Trade Organization rules and detrimental to the global growth of EV sales. This reaction highlights the potential strain that this investigation could place on the relationship between the EU and China.

Financial Targets Remain on Track

Despite the concerns surrounding the EU investigation, BMW’s Chief Financial Officer remains optimistic about the company’s financial targets. Mertl asserts that BMW will be able to present “good numbers” in line with their raised forecast for a 9-10.5% margin on earnings before interest and taxes. This reaffirms BMW’s confidence in its ability to navigate the challenges posed by the ongoing investigation.

Demand for EVs and Supply Chain Challenges

Addressing the reported dampened demand for EVs, as indicated by Volkswagen, Mertl assures that BMW is experiencing increasing sales in this segment and remains on track to achieve their goal of 15% fully-electric sales for the year. However, he acknowledges that there are ongoing supply chain problems in logistics and transport that could persist for the next six months. These challenges may impact the overall production and delivery of EVs.

Conclusion

As BMW’s CFO expresses concerns over the EU’s investigation into subsidies for China-made EVs, it becomes evident that potential backlash from China could have significant ramifications for European car manufacturers. The importance of the Chinese market cannot be ignored, and any retaliatory measures could have a lasting impact on the industry’s transition to electric vehicles. Despite these challenges, BMW remains confident in meeting its financial targets and sustaining growth in the EV segment. As the investigation unfolds, it will be crucial to monitor its impact on the broader automotive industry and the relationship between the EU and China.