Audi’s decision to place the plant that will build the new Q5 crossover in Mexico resulted from more than cheaper labor and government incentives. According to CEO Rupert Stadler, Europe’s growing interest in SUVs and and crossovers played a key role. The European Union slaps a 10 percent tariff on U.S.-built vehicles, which would have cost Audi more than $3,000 per vehicle.1 Only 25% of the cars produced will be targeted for the U.S. A majority will instead be headed for the European Union.
This is part of a growing trend in which cars are produced in a foreign country and then exported to the market country, in part due to cheaper labor costs and flexibility in trade laws. This also presents a problem for Europe, which continues to see problems with decreases in production done within the continent as more and more jobs are being lost to Asia and Latin America. Rather than importing cars produced in other countries, Europe will need to increase the imports of its own cars to help the industry. While the trend in demand for production is certainly shifting from Europe towards other continents, changes in tariffs and trade laws by the EU may be needed to slow decline during the recession.