How Chinese Auto Parts are Revolutionizing the U.S. Market

The Chinese auto parts industry has seen rapid growth over the last two decades, initially driven by the expanding Chinese vehicle manufacturing industry. As domestic demand grew, Chinese automotive parts suppliers began supplying vehicle manufacturers and the aftermarket in foreign markets, including the United States.

China’s Position in the U.S. Auto Parts Market

In 2018, China became the United States’ second-largest source of automotive parts imports (after surpassing Canada in 2017), accounting for nearly twice the share of U.S. auto parts imports (three times the value) that it accounted for in 2007. However, China is unique among the top six parts supplier countries to the United States, in not being a significant source of U.S. vehicle imports.

Impact of the Trade War on Chinese Auto Parts

Despite the ongoing trade war between the U.S. and China, China remains a key supplier of auto parts for the U.S. China accounted for 10.3% of U.S. auto parts imports in the year through Nov. 30, 2019, down from 13.1% in 2018. Experts had expected a larger drop given the trade war.

Advantages of Chinese Auto Parts

Despite the trade war complicating matters for automakers, China remains a “highly reliable, low-cost provider that car manufacturers love”. Switching supply chains to another country can be costly, which might be part of the reason carmakers decided to stick it out with China. However, they also warned of potential challenges on the horizon. The new United States-Mexico-Canada Agreement could keep North America in the mix for sourcing.

Future Challenges

The new coronavirus outbreak is impacting production in the region. But these disruptions will be temporary as long as the outbreak does not last too long. Experts say, “I think China will continue to be a major source of auto imports based primarily on cost. They continue to be the lowest-cost producer in the world, and we don’t see much changing with that yet.”

In conclusion, despite facing trade wars and new challenges, Chinese auto parts continue to play a significant role in the U.S. market and are revolutionizing the landscape.