Chinese auto parts manufacturers with production facilities in North America are expected to experience minimal disruptions from potential trade tariffs imposed by the United States on Mexico.
Analysts from UBS believe that the 10% tariff proposed by President-elect Donald Trump will have limited impact on Chinese auto part exports, as it is below market forecasts. Additionally, U.S. companies are unlikely to easily replace their reliance on Chinese suppliers, giving Chinese firms leverage in negotiations regarding tariff costs.
Chinese auto parts manufacturers, such as Fuyao Glass Industry Group, Huizhou Desay SV Automotive Co Ltd, and Ningbo Tuopu Group Co Ltd, have established production facilities in the United States, which provides them with a degree of protection against tariffs. Fuyao, in particular, holds a significant market share and is planning to expand its capacity by 2025. UBS analysts suggest that Fuyao's established market position makes it unlikely to be supplanted by foreign competitors, allowing the company to potentially pass on some of the tariff costs to downstream customers. Similarly, Huizhou Desay SV Automotive Co Ltd and Ningbo Tuopu Group Co Ltd are expected to face limited repercussions from the proposed tariffs. Ningbo Tuopu Group, a critical supplier to Tesla, is well-prepared to redirect U.S. orders to its upcoming manufacturing plants in Malaysia and Poland.
Overall, UBS's analysis indicates that the impact of tariffs on Chinese auto parts manufacturers will be minimal, allowing them to maintain their competitive edge in the global automotive supply chain. The strategic positioning of these manufacturers, their production capabilities, and their ability to adapt to changing market conditions will play a significant role in shaping their future trajectory in an increasingly competitive environment.