As tensions rise between China and Taiwan, automotive aftermarket companies are raising concerns over the flow of parts from the Pacific Rim and the potential for disruption.
Liz Clark, automotive team lead from the U.S. Office of Transportation and Machinery at the International Trade Administration, shares those concerns as well, acknowledging that the situation presents a real challenge.
“I think that that’s one of the reasons why you’ve seen a very strong push towards diversification. And both through reshoring and also nearshoring to our partners and allies is sort of that acknowledgement that is a big area of concern as to the geopolitical stance in that region, and especially as relates to China and Taiwan,” she said during the 3 Dragons: A View from an Economist, Wall Street Analyst and Aftermarket Analyst session at the MEMA Aftermarket Suppliers Vision Conference.
But moving production to the U.S. is likely too much of a stretch for the aftermarket in broad terms, noted Bret Jordan, managing director at consulting firm Jefferies. So much is imported from Asia, which is a lower-cost market. Mexico would be the most realistic option with Eastern Europe being another.
“But I don’t think I talk to anybody who’s out there on the distribution of the parts side who isn’t looking at reducing their exposure to China,” he said during the same panel in Chicago.
Looking at the war with Russia and Ukraine, things can change over time. “And there can be a strong response to geopolitical actions that necessitate a response. And so I think that’s going to be sort of that shifting landscape,” Clark noted.
While China has been aggressive in some parts, they’ve also taken more passive action and sought out other markets around the world for their products.
“And that’s especially true in a lot of those third-party markets in the emerging world,” Clark said. “So they have been very active in terms of building out their networks, building out their supply chain — not just resourcing for themselves in terms of raw materials, but also pushing their products and building out those future export markets.
“So it’s both kinds of thinking about it in terms of those immediate responses to aggressive actions, but there’s also a lot of passive activity going on in terms of developing their market.”