Transnational automotive supply chains are being de-centralised.

(Schematic, AFP)

[Financial Channel/Comprehensive Report] Due to the uncertainty caused by China's epidemic prevention policy and the deterioration of relations between Beijing and the international community, the supply chain of the global auto industry is worried. Multinational auto companies have quietly transferred orders to reduce their dependence on China.

The CEO of Stellantis bluntly stated that China is not the only country, nor is it the best country. There are also India, Mexico, North Africa and parts of Asia to choose from.

The "Financial Times" reported that the de-centralization of the auto supply chain is mainly driven by two major factors. One is the uncertainty of factories being shut down due to China's zero-zero policy; the other is the long-term consideration that China may break with the international community after Russia. There is a deeper decoupling in politics.

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For more than a year, Ford and General Motors have been aggressively moving component supply chains outside of China, according to people familiar with the matter.

General Motors confirmed that most of the components used in North America are already supplied in North America, and the challenges of the supply chain in the past few years have strengthened the resilience of our supply sources.

Ted Cannis, director of Ford Motor, also said that the industry is setting off a wave of rethinking logistics operations, and the supply chain will become the focus of the next 10 years.

Carlos Tavares, CEO of Stellantis, emphasized that if 85% of the cost of a car is component parts, if this 85% problem is not solved, it will be difficult to realize the benefits.

But China is not the only, or even the best country, there are India, Mexico, North Africa and many places in Asia to choose from.

Japanese companies are also preparing to slip away. Mazda executive director Katsuhiro Moro believes that it is no longer an era where cost determines everything. At present, we still need to consider the robustness of our supply chain to ensure the stability of component procurement.

Honda also admitted that due to the impact of multiple factors such as the closure of Shanghai on production and supply, it is considering hedging supply chain risks in various ways, but has not specifically considered decoupling from China.

Compared with many multinational companies that have started de-sinification, German automakers Mercedes, BMW, and especially Volkswagen are more dependent on China, and the supply chain risks of these automakers are greater.

RBC's Narayan warned that the Germans' close ties to China, not only in procurement but also in terms of customers, is the biggest risk investors are focusing on right now.

According to the report, although most foreign automakers are unlikely to give up the big pie in China, the supply of parts and components from China to the rest of the world will gradually decrease, eventually forming a closed supply chain for the production of parts and cars exclusively for the Chinese market.

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