The strength of the euro against the US dollar is tilting against export-oriented German premium carmakers. The euro has appreciated 25% against the dollar since January 2002. Historically, an exporter shipping from a weak-currency side has an advantage in strong-currency markets, and can undercut rivals’ prices. But strong-currency exporters must cut margins — or raise prices and lose sales, Automotive News Europe said.

A consistently strong dollar over the past decade has helped European luxury automakers build a strong presence in North America. But these days, carmakers have learned how to cope with short-term exchange rate volatility.

Tactically, they hedge, buying currency-rate financial futures that offset rate fluctuations. Strategically, most mass-market automakers and suppliers produce where they sell. Global exporters seek so-called natural hedging — balancing production and sales so exports and imports roughly balance out.

The question is how long the situation will last. Many currency traders say US economic fundamentals — slow growth, big trade deficits and growing government debt — work against a stronger dollar. Most affected are German companies such as BMW, DaimlerChrysler, Porsche and Volkswagen group. General Motors and Ford mostly build where they sell except for their luxury Swedish and British brands, which are outside the eurozone.

Tactically, the Germans are largely covered. VW group was only 40% hedged, and the euro’s strength helped drive first-quarter pre-tax profits down 66.8% to E331 million. But BMW, Porsche and D/C are completely hedged.

“Porsche nearly went bust in the 1980s. It relied on the USA but wasn’t hedged,” said Porsche spokesman Immo Dehnert. “Now we have hedged our dollar positions almost 100% for the next four years.” But long-term hedging is costly. One solution is to shift production to weaker currency areas. BMW and D/C already have US plants and have encouraged suppliers to follow. Saab plans to add models built by other GM affiliates in Japan and the USA. The incentive to move is strong.