The "containment" and "detention" of European and American automobile exports, and the spillover of the Middle East war...... Many factors implicate the process of auto parts going overseas
At the beginning of 2024, many auto parts manufacturers will look overseas, and regard auto parts going overseas as the best strategy to cope with involution and break through development. And some people who have already stepped out are also anxious at the moment, because the recent international political situation has become more turbulent, and various uncertainties affecting business have increased. The following is a summary of recent international events and their impact on auto parts going overseas.
Author: Hong Yue
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First, the U.S. political circles are "contained", and the direction of the Sino-US auto trade war is unclear
In February, the U.S. launched an investigation to assess whether Chinese electric vehicles pose a threat to U.S. national security. In fact, this is the anxious reaction of the United States to the rise of Chinese electric vehicles in the United States. Since the mainland became the world's largest automobile producer and one of the largest automobile exporters last year, especially in the field of electric vehicles, the United States has felt the "threat" and believes that China poses a challenge to the American auto industry.
At present, the U.S. has imposed tariffs on Chinese electric vehicles at 27.5%, and U.S. senators recently proposed raising the tariffs to 100%, which is almost equivalent to boycotting and banning Chinese electric vehicles from the U.S. market. As of press time, the matter of imposing tariffs has not yet been decided.
01 Increase in trade barriers: The trade friction between China and the United States may lead to an increase in trade barriers, including tariff increases, quota restrictions, etc., making the trade environment for auto parts going overseas more complex and uncertain.
02 Market share changes: Market share may change as competition between China and the United States intensifies in the field of electric vehicles. Some auto parts companies may lose some market share due to trade restrictions, or need to adjust their market strategies to adapt to the new trade environment.
03 Increased cost pressure: Trade frictions may lead to rising raw material prices and increased transportation costs, thereby increasing the cost pressure of auto parts going overseas. Companies may need to find alternative supply chains or adjust their pricing strategies to cope with rising costs.
04 Technology transfer and cooperation strengthened: In order to avoid trade barriers and improve competitiveness, auto parts companies may need to strengthen technology transfer and international cooperation. This may include measures such as co-production with local enterprises and the establishment of overseas R&D centers to improve the adaptability and competitiveness of products.
Second, the United States, Japan and the Philippines have escalated provocations and divided the cooperative relationship between China and ASEAN
On April 12, the leaders of the United States, Japan and the Philippines held a trilateral summit meeting on security and economic issues, including joint patrols, U.S.-Japan military assistance to the Philippines, Taiwan Strait security, and cooperation in supply chains for critical industries, emphasizing that the three countries will carry out deeper cooperation in economic, trade and investment, military security, and regional affairs. This is the Biden administration's strategic layout of promoting "small multilateral" in the Indo-Pacific region, aiming to serve and consolidate the U.S.-centered hub-and-spoke alliance system, and another important role is to drive a wedge between China and ASEAN.
Joint U.S.-Japan-Philippines naval patrols will exacerbate political tensions in the South China Sea, leading to an unstable trade environment that will adversely affect the auto industry's exports, especially if countries associated with the South China Sea implement new trade policies or tariffs.
The South China Sea is one of the world's most important shipping routes. If joint patrols affect the safety or free flow of shipping routes in the South China Sea, export logistics in the automotive industry could face delays or higher costs.
Joint patrols may cause some countries, including ASEAN countries (Malaysia, Indonesia, Thailand, Philippines, Singapore, Brunei, Vietnam, Laos, Myanmar and Cambodia) to adjust their trade partnerships, which may affect the market for automotive exports.
The "small multilateral mechanism" may lead to the destruction of the cooperative relationship between China and ASEAN, and the access of Chinese auto parts products in the ASEAN market may be affected, including strengthening tariff restrictions and quota restrictions on Chinese auto parts products, making it more difficult for auto parts companies to go to the ASEAN market.
If China's partnership with ASEAN is alienated, other competitors may fill the void and competitive pressures may increase. Auto parts companies may need to face competition from other countries for auto parts products and compete for limited market share.
Third, Iran's involvement in the Palestinian-Israeli conflict has made the escalation of the situation in the Middle East more complicated
In the early hours of April 14, Iran launched its first direct attack on Israel from its own territory, firing missiles and drones at Israel, while Iran's allies Allah and Yemen's Houthis joined the attack. As an important force in the Middle East, Iran has openly supported Palestine, making the situation in the Middle East even more complicated and full of uncertainties.
1. Challenges to regional stability: Iran's involvement in the Palestinian-Israeli conflict may exacerbate geopolitical tensions in the Middle East, leading to challenges to regional stability, which in turn will lead to increased uncertainty in the trade environment and affect the predictability and stability of auto parts going overseas.
2. Decline in the safety of transportation channels: The escalation of the war has led to a decrease in the safety of some transportation channels in the region, such as sea transportation channels or land transportation channels, which will increase the transportation risks and costs of auto parts and have an adverse impact on auto parts going to sea.
3. Adjustment of trade relations: countries in the Middle East may adjust their trade relations with Iran because of Iran's intervention, which may affect the import and export of auto parts and cause changes to auto parts going overseas.
4Risk of supply chain disruption: If the conflict escalates into a full-scale conflict or war, it may lead to an increased risk of supply chain disruption, and automakers may face supply chain disruptions from the Middle East, affecting vehicle production and exports.
5. Increased regional economic uncertainty: Iran's involvement in the Palestinian-Israeli conflict may lead to increased economic uncertainty in the Middle East, which may affect auto sales and consumer confidence, which in turn will affect the demand for auto parts overseas.
Relevant companies should pay close attention to the development of the situation in the Middle East and take corresponding countermeasures to reduce possible risks and impacts.
Fourth, European ports have become "parking lots", implicating auto parts to go to sea
Recently, the Financial Times reported that Chinese manufacturers were sending far more electric vehicles to Europe than market demand, leaving thousands of cars stranded in port parking lots, some for up to 18 months, sparking displeasure among port operators. Many domestic and foreign industry officials have accused China of "overcapacity" of electric vehicles, but China's commerce minister has denied this accusation, believing that it may be due to the impact of the Russia-Ukraine war, strikes and other impacts, and the lack of enough trucks and drivers to transport vehicles from the port to inland dealers, resulting in the detention of cars.
(Picture from: Global Network)
In any case, the embarrassing situation of Chinese cars at European ports has raised concerns about supply chain issues. Compared to the same period in 2023, the number of cars exported by mainland manufacturers to Europe has increased by 58%, most of which are destined for the shores of Belgium, the United Kingdom, Germany and the Netherlands.
1. Shipping Delays and Increased Costs:
Delays in cargo handling and transportation at European ports due to parking conditions can increase the time and cost of auto parts going to sea. Prolonged detention at the port can result in goods not reaching their destination on time, affecting the smoothness of the supply chain.
2. Tight supply chain:
Port parking conditions can lead to supply chain straines, making it difficult for automakers and auto parts companies to get the parts and raw materials they need in a timely manner. This can affect production schedules and increase inventory costs.
3. Order Hold and Cancellation:
Shipping delays due to port parking conditions may cause the automaker to cancel or adjust the order, or to find another supplier. This will have a direct impact on the order volume and revenue of auto parts going overseas.
Looking at the world, it is a huge opportunity for auto parts to go overseas, but it is also deeply affected by many factors such as geopolitics, international relations, supply chain changes, etc., market demand and competitive environment are changing rapidly, and those who go to sea are cautious!
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