The European Union's probe into Beijing's electric-vehicle subsidies is meant to protect its carmakers from a flood of cheap Chinese cars. But if it leads to tit-for-tat tariffs, Mercedes-Benz Group and BMW's biggest moneymakers will be most exposed.
For Germany's high-end manufacturers, including Porsche, China has proven an insatiable market for their most expensive models, such as the Mercedes S-Class, BMW 7-Series and Porsche Cayenne SUV. Those vehicles, however, are mainly imported, putting them in the line of fire if Beijing retaliates against any EU measures.
"Those who live in glass houses shouldn't throw stones," Bernstein analysts Daniel Roeska and Eunice Lee said in a research note. The three German luxury-carmakers are at greatest risk of taking a big hit should the trade dispute escalate, they said.
China is the biggest destination for Germany's most expensive vehicles. Last year, the country accounted for more than a third of global sales of BMW's 7-series and Mercedes' S-Class. The 1.47 million yuan ($201,000) ultraluxury Maybach built by Mercedes ships more than 1,000 times a month from Chinese showrooms.