US-China trade war may push companies to localize production in China


The ongoing Washington and Beijing trade war, could push automobile companies to produce more in China, the CEO and founder of Shanghai-based consultancy Automobility told CNBC on Thursday.

Tesla has raised prices on its automobiles in the China market in response to the tit-for-tat American and Chinese tariffs.

Beijing imposed a 25 percent additional tariff on imported American cars in response to U.S. tariffs on $34 billion in Chinese goods, including the automotive sector.

China’s auto market is massive, with 28.8 million cars sold in 2017, Automobility CEO Bill Russo said. That being the case, he reasoned that automobile companies importing to China may move to localize their production within the country in order to avoid the tariffs.

“China only imports out of their 28.8 million units about 1.2 million vehicles and above, less than 300,000 a year are sold or produced in the United States. So yeah the tariffs are actually working to make the companies who are doing business with imported vehicles less competitive in the market,” he explained.

Russo added that tariffs will negatively affect the automobile industry and several brands that import to China may have to reconsider where the “footprint of your (their) production should be” in order to be cost effective.

The relocation of production to China could come at a cost of fewer jobs available for Americans in the automotive industry, Russo said.

Source : CNBC