Recent threats of steep trade tariffs on Mexico by President-elect Donald Trump are expected to have limited disruptions on Chinese auto part makers, especially those with plants in North America.
UBS analysis suggests that the proposed 10% tariffs on Chinese imports may not significantly impact auto part exports from local plants, as it falls below market expectations.
Regarding companies with manufacturing facilities in Mexico, UBS indicates that it would be challenging for U.S. manufacturers to reduce their reliance on Chinese suppliers. The brokerage anticipates that Chinese firms and their U.S. clients will likely share the burden of tariff costs, as seen in the previous administration.
The high dependence of U.S. manufacturers on Chinese auto part makers provides the latter with leverage to negotiate cost-sharing arrangements, according to UBS.
UBS highlights that certain Chinese firms with plants in the U.S., such as Fuyao Glass Industry Group, are immune to tariffs. Fuyao, with a significant market share, is unlikely to be replaced by overseas competitors and could potentially pass on tariff costs to downstream customers.
The impact of tariffs on companies like Huizhou Desay SV Automotive Co Ltd and Tesla supplier Ningbo Tuopu Group Co Ltd is forecasted to be minimal by UBS. Desay, with limited exposure to Mexico production, is expected to benefit from demand from local players and its global production footprint. On the other hand, Tuopu, a key Tesla supplier, is poised to shift U.S. orders to upcoming plants in other countries.