GM Seeks Tariff Protection for the Envision, a Popular Chinese-Made SUV

author: Jeremy Carlton   

The Trump administration's tariffs on Chinese imports is threatening U.S. automaker General Motors. The detroit-based automaker is seeking to exempt the Chinese-made Buick Envision sport utility vehicle to prevent the key model in the brand's U.S. lineup from becoming a victim of the U.S. China trade war.

Buick currently offer just three SUV models. The compact Encore, the mid-size Envision and the Enclave. In the U.S. the Envision has a base MSRP of $33,995. A 25 percent proposed tariff by the Trump administration could raise the price of the Envision by $5,000.

Envision is a popular model in China for Buick, the 100-year-old GM luxury nameplate. GM sold around 200,000 Envisions in China last year. In GM's request, the company wrote that tariffs on the Envision might led to it being dropped from its U.S. model lineup altogether, a damaging blow to the Buick brand.

GM added that the Envision, although built in China, rounds out the Buick lineup in the U.S. The automaker said it needs to have a complete lineup to compete against import brands like Acura, Audi, BMW, Lexus, Mercedes-Benz and Volvo.

The midsize SUV, priced starting at about $35,000, has become a target for critics of Chinese-made goods, including leaders of the United Auto Workers union and members in key political swing states such as Michigan and Ohio.

Last year, the Envision accounted for about 19 percent of Buick brand sales in the United States.

GM argued that to remain competitive with other brands, Buick must offer many different models across market segments, including sedans, crossovers, and SUVs. The Envision holds an important place in Buick's portfolio, offering dealers and consumers greater choice in their purchase options, and protecting Buick's competitive position in the industry.

GM said in a statement that it filed the request on July 30 with the U.S. Trade Representative. An official notice was posted on Thursday on the regulations.gov website, which is tracking requests for exclusions from the so-called Section 301 tariff on certain imported goods from China.

GM, the largest U.S. automaker, argued in its request that Envision sales in China and the United States would generate funds "to invest in our U.S. manufacturing facilities and to develop the next generation of automotive technology in the United States."

GM wrote the vehicle is critical to Buick's U.S. product portfolio. However,  the U.S. market does not demand sufficient quantities of the vehicle to justify moving production from China to the United States. About 41,000 Envisions were sold in the U.S. last year.

GM added that relocating manufacturing to the United States for the Envision is not feasible, as the time required for doing so is longer than the remaining lifecycle of the vehicle. Rather than paying a 25 percent duty and import the vehicles at a loss, which could negatively impact the company and our employees, GM wrote that it may need to stop selling the Buick Envision in the U.S. market altogether because of the tariffs.

GM President Dan Ammann defended the vehicle, saying that it benefits the U.S. market.

"The profitability we generate on that vehicle, selling it in the U.S. market, we obviously reinvest it here," he said on Friday on the sidelines of a conference in Detroit. However, the UAW said it was opposed to the exemption.

"It will continue to be the position of the UAW that products sold in the U.S.A. be made in the U.S.A.," Terry Dittes, the union's vice president and head of its GM department, said in a statement. "They can simply build these 41,000 Buicks right here in the U.S.A. and create American jobs!"

Envision sales from April through June fell to just 7,000 vehicles, while inventories climbed to more than 13,000 vehicles at the end of June. At the current sales rate, the Envision supply should be enough to keep many U.S. dealers stocked through the end of the year.

GM had lowered prices by as much as $2,500 on the 2019 models, which it started shipping in late April. That means Buick's 2,000 U.S. dealers should have lower-priced Envisions to sell well into the fall.

GM shipped in a six-month supply of Envisions at the much lower 2.5 percent tariff rate before July 6, when the tariffs take effect.

"The previous price point was too high" on the 2018 Envision, said Casey Clark, sales manager at Serra Buick GMC Cadillac in Washington, Michigan, in an interview. "That put off some customers."

GM has provided Buick dealers with incentives to keep Envisions in stock. These include financial offers to put Envisions into fleets of vehicles loaned to customers whose cars are being repaired, the source said.

Despite the request for a tariff exemption, GM has announced no plans to stop U.S. sales of the Envision or to relocate production of U.S.-bound models to another plant outside China, a source familiar with the company's strategy said on condition of anonymity.

This year, GM plans to cut Envision imports to around 35,000 vehicles.

Jeremy Carlton