Mercedes-Benz and Nissan plan to invest more in the U.S. after the Trump administration won a new trade agreement with Canada and Mexico that requires more of each vehicle to be built in North America, by higher-paid workers, the Financial Times reported.
Under the terms of the deal to update the North American Free Trade Agreement, which still requires congressional approval, at least 75 percent of parts in a finished vehicle must come from the region, up from the current 62 percent. Automakers would also be required to produce 40-45 percent of a car with a workforce making at least $16 per hour.
Experts say those two provisions will spur new auto manufacturing investments in both the U.S. and Canada, and that companies are already discussing changes to the supply chain to reflect the new trading environment.
Nissan’s chairman confirmed that some adjustments are looming but added that investment in Mexico, where the company is the largest auto producer, would continue.
“There will be more investment in the U.S.,” Carlos Ghosn said at the Paris Motor Show, according to the Financial Times. “We’re going to have to fine-tune our supply chain and make some changes in the organization.”
Dieter Zetsche, chief executive officer of Mercedes parent company Daimler, said the carmaker’s existing supply chain “is not fulfilling the future requirements.”
“That’s why we have to now, with a more precise definition, see what is the judgment on what will fill the gap,” he said at the same conference. Mercedes currently has a plant in Alabama, but Zetsche said the company will “have to see to what extent” adjustments might be needed.
[Related: For US automakers, NAFTA overhaul won’t eliminate tariff risk]
A Nissan spokesman confirmed the comments but declined to provide any additional details.
A Mercedes spokeswoman added that further localization would be necessary in its car division if the deal is agreed to, but that the compnay’s “localization level is already relatively high.”
“Decisions have not yet been taken,” she said in an emailed statement.
Outside of the update to NAFTA, the Trump administration has rocked the global automotive industry with tariffs on steel and aluminum imports, as well as duties on $250 billion worth of Chinese products. China, the European Union, Mexico, and Canada have all responded with retaliatory tariffs. The White House has also threatened duties of as much as 25 percent on autos and auto parts, which Canada and Mexico would largely escape under the overhauled trade agreement.
