Trump tariff could be a 'big problem,' says CEO of Europe's biggest car maker

Key Points
  • President Trump has reiterated his threat to levy more taxes on German carmakers.
  • The VW Group CEO tells CNBC it could be a "big problem".
  • VW continues its push into electric cars with a major battery investment.
VW boss: Trump threat could be a big problem

The CEO of the VW Group said President Donald Trump's threat to punish German carmakers is a major concern for his company.

In a speech in Pittsburgh, Saturday, Trump called on the European Union to "open up the barriers and get rid of your tariffs. And if you don't, we're going to tax Mercedes-Benz, we're going to tax BMW."

Volkswagen Group's CEO Matthias Mueller told CNBC Tuesday that his firm is now waiting to see how German lawmakers would react.

"For the German motor industry this is possibly a big problem, even for VW," he said. "We now need to consider whether these protective tariffs will be introduced and how German politicians will react and what the rules of the game will be."

Nonetheless, Mueller added that VW Group was developing its Chattanooga plant in Tennessee, which would allow the firm to manufacture without the fear of import duties.

Electric push

At an investor day on Tuesday, VW said it wants to launch 80 new electric cars across its range of brands by 2025.

The group announced Tuesday that partners have been chosen to provide 20 billion euros ($24.7 billion) worth of battery technology as the auto group pushed into zero-emission vehicles.

The automaker also said it would expand its production of electric cars to 16 factories worldwide by the end of 2022.

Mueller said while electric car uptake was still low, he expected sales to rise and capacity in its Dresden factory had been doubled to account for customer demand.

The firm has tried to move past the 2015 scandal which exposed that real-world emissions on some of its Diesel cars were up to 40 times greater than in test results.

"Dieselgate," as it came to be known, is so far estimated to have cost the German firm around $25 billion in the U.S. alone.

VW Group's operating profit in 2017 nearly doubled to a record 13.8 billion euros ($17 billion) from $7.1 billion the previous year. The firm has reiterated that it expected higher sales and revenue this year.

However, because of ongoing investment in electric and fines related to "Dieselgate," VW said it expected the return on sales in 2018 to sit between 6.5 and 7.5 percent, compared with 7.4 percent in 2017.

Pay for Volkswagen's top executive board jumped 27 percent to 50.3 million euros in 2017. The package for Mueller alone shot up by 40 percent to 10.14 million euros in pay and benefits.

The increase is ascribed to VW's improved results and a change in rules governing executive pay.