Let the tariff hurricane blow, China's auto industry remains unscathed | Deep Dive Lite
Text | Li Qin, Xu Caiyu
Editor | Yang Xuan
In November 2024, during the week when Trump was elected, Lars Moravy, the top R & D official at Tesla, led a team to visit Tesla's supply chain in China.
They had accurately sensed the signal that the new president would resort to the old tactic of a tariff war. They began to mobilize Tesla's Chinese suppliers to disperse production capacity to Southeast Asia and other regions to cope with the impending wave of tariffs.
Battery factories such as EVE Energy and Sunwoda received clear signals and launched several rounds of investments in Thailand. However, obviously, Tesla guessed the beginning but not the end. Trump's tariff hammer came down like a hurricane.
On April 2, 2025, Trump announced the establishment of a 10% "minimum baseline tariff". Among them, the tariffs on Chinese products exported to the United States continued to increase, rising from 34%, 84%, 104% to the current 145%.
Many key components of Tesla's Cybertruck still come from China and haven't had time to be transferred.
In contrast, under the new tariff storm, China's automotive industry chain was unexpectedly calm.
The decoupling of the Sino - US automotive industries is not new. In 2024, China's total exports of complete vehicles to the United States were 116,000 units, accounting for only 1.8% of China's total automotive exports. This part of the export volume mainly comes from joint - venture brands, and Chinese independent passenger vehicle brands have hardly carried out official exports to the United States.
As for imports, it was even calmer.
The complexity of the industrial chain and the long switching cycle determine that the past global automotive industrial chain is highly sensitive. Facing the risks caused by tariff changes, Chinese automakers have made defensive arrangements in advance.
Independent Automakers Plan Ahead, While Foreign - Invested Brands Begin to Bear Pressure
Due to restrictions on the production locations of semiconductor wafers, companies such as NIO and Xiaomi still purchase silicon carbide chips from US company Wolfspeed.
"After evaluation, the cost of silicon carbide chips for one vehicle will increase by thousands of yuan." A source said. Although it's not a small amount, NIO has found an alternative solution from ON Semiconductor's wafer factory in South Korea and is expected to make the switch soon.
Other Chinese independent automakers felt the impact even more slightly.
A person from Li Auto revealed that currently, it was mainly found that some chips from secondary suppliers come from US factories such as Texas Instruments, as well as power supplies from ADI. However, they can all be switched to alternatives, and the unit prices are not high, only a few yuan per piece. Even if they have to bear a 100% tariff, it won't cause too much pressure, especially since the upstream and downstream will share the cost together.
"According to preliminary statistics, the cost increase for a complete vehicle is only a few hundred yuan." A person familiar with the matter was surprised and said that the risk was even controllable enough not to require a detailed report to the senior management.
Even SAIC - GM, a Sino - US joint - venture automaker, can be insensitive to the sharp increase in tariffs due to years of localizing its supply chain.
"SAIC - GM has been reducing direct imports of parts from the United States since 2018. Take the engine as an example. Among thousands of parts, only 4 are still directly imported from the United States, and an urgent localization project is underway again." A GM engineer told 36Kr that, including inventory and in - transit parts, "if the new tariff is implemented, the estimated loss for one year will be less than ten million yuan."
Compared with the calmness of domestic automakers, US - funded automakers in China generally bear more serious pressure.
In the first week when the tariff storm swept in, Tesla's supply chain personnel began to visit suppliers to check the parts flowing between China and the United States.
"Tesla has a relatively high localization rate in China, so there aren't many parts from the US headquarters, only some standard parts on the chassis with very low unit prices, which can be completely borne." An industry insider said.
However, the parts imported from China by US factories account for a considerable proportion.
Especially for Tesla's electric pickup truck, the Cybertruck, CEO Elon Musk loves this product with a dreamy design and has given it a new technical architecture. For example, it uses a 48V low - voltage battery supplied by the Chongqing factory of Zhuhai CosMX. After adding a 145% tariff, the proportion of battery cost in the whole vehicle may exceed 50%.
According to 36Kr, although Tesla had previously selected Sunwoda's production base in Thailand for its 48V battery, unfortunately, compared with the new president's swift tariff action, it was still one step behind, and it will take several months before the production can start.
Ford also suffered relatively heavy losses. Although it has been implementing local production in China for many years, some core components in its high - end models, such as turbochargers in engines, still rely on imports from the United States.
After the tariff increased by 125%, some models are no longer feasible to continue production.
An industry insider revealed that the Chongqing factory of Ford's electric SUV Mustang, which used to export tens of thousands of vehicles every year, is now close to shutting down.
Ford also announced that considering the tariff factor, it will suspend exporting the F - 150 Raptor pickup, Mustang sports car, and Bronco SUV produced in Michigan, as well as the Lincoln Navigator produced in Kentucky, to China.
A senior Ford official told 36Kr that at the beginning of the tariff war, Ford's CEO asked Trump for help, pointing out that the tariff war is not conducive to Ford's development. Because a large part of Ford China's current profits come from vehicle exports, especially the exports of the high - end brand Lincoln to the United States.
There are tens of thousands of parts in a vehicle. Without a single screw, the vehicle can't be produced. This is a common saying in the automotive industry to prove the complexity and refinement of the automotive industrial chain. And China is the well - deserved world's largest automotive producer and seller, producing more than 20 million vehicles every year. The second - largest is the United States, producing about 15 million vehicles annually.
The past automotive supply chain was a typical example of the global industrial chain, extremely complex. The plastic particles for automotive interiors may come from Europe, the chip design is from the United States, the chips are produced in Taiwan, China, and then go to Malaysia for packaging and testing. The scarce materials for batteries come from Africa and Indonesia and are processed into battery packs in China.
However, such a complex industry that seemingly has intricate connections between major automotive countries showed quite calmness during this Sino - US tariff storm. Especially China's automotive industry has almost achieved an impossible "decoupling example" under the turbulent global trade situation.
The answer behind this is not very complicated. In addition to being complex, the automotive supply chain also has a long switching cycle. A large number of testing, verification, certification, and announcement processes make the change of some key components often take up to two years. Therefore, its high complexity determines its high - risk sensitivity, which in turn requires automakers to make a negative assessment of any risk factors in the supply chain and make defensive arrangements.
That is to say, when Trump waved the tariff stick during his first term, the supply chain engineers of domestic automakers had already started to eliminate risks without hesitation.
No Illusions, Prepare for the Worst
The three major elements of the automotive supply chain are cost, quality, and stability. Since the pandemic, stability has become one of the core considerations for the supply chains of various automakers. Mature and large - scale automakers will almost always conduct in - depth analyses of the geopolitical situation during supply chain inspections to build the most conservative risk models.
"We have long prepared for the worst, which is decoupling and supply chain disruption." A supply chain management official from an automaker said. Although no one hopes that this situation will happen, we can't have too many illusions.
The stability risk caused by the production location needs to be eliminated, and the parts from the United States are important targets for prevention.
They even take the Wall Street capital holdings of some key electronic component companies as a factor for inspection. "Because of the impact of tariffs and no profit, they may stop their business at any time."
If automakers still use parts from the United States due to factors such as low cost, they will almost always develop a local or backup alternative solution in advance.
For example, many automakers still use Texas Instruments' chips today because the latter's products are mainly non - core power management chips with mature technology and early - completed R & D amortization, so the prices are quite competitive. However, if the prices increase due to tariffs, there is no threshold to find alternative solutions.
Similarly, Gentex in the United States is a high - quality supplier of automotive rear - view mirrors with low costs. However, if the cost increases significantly after the additional tariff, domestic automakers will quickly switch to alternative solutions. "We'll simply introduce domestic alternative solutions, and the switch can be completed quickly."
A NIO official also revealed that the reason why they can quickly find an alternative solution for Wolfspeed and make the switch now is that two years ago, they had already started to evaluate the risks of using semiconductors from the United States, prepared "alternatives", and carried out a series of development for function verification in advance.
This kind of preventive awareness not only exists in the supply chain but also in the global market layout of automakers. For example, a large number of new - energy vehicle products of Chinese automakers are quite appealing in the US market.
Moreover, high - end brands such as NIO and Li Auto can occupy markets globally, mainly in China, Europe, and North America.
Therefore, NIO and Li Auto conducted a series of investigations around the US market in the early stage. A person familiar with Li Auto's senior management revealed that Li Auto's products are very suitable for the United States, and the word - of - mouth from user surveys is quite good. Many people hope that the products can be sold there. Li Auto even evaluated a plan to build a factory in Mexico in the early stage.
However, considering the complex and changeable local policies, they finally gave up. "It would be an investment of billions to enter, and the risk is too high."
Sure enough, in September 2024, the Biden administration began to impose a 100% tariff on Chinese electric vehicles.
An Independent Supply Chain May Be Stable but Unhealthy
Chinese automakers that have adopted a conservative approach to layout their supply chains have been spared from the impact of the tariff storm. However, for foreign - invested automakers that are still promoting localization, tariffs have become a "death knell".
Tesla has urgently started to disperse its production capacity to Southeast Asia. However, the unreliability of the power systems in Southeast Asia and South Asia is a common understanding in the automotive industry, which is a typical drawback for heavy - manufacturing industries.
An official from a German automotive parts company told 36Kr that when his Indian colleagues came to China, their biggest surprise was "there is no power outage here".
Another battery industry insider said, his company's factory in Thailand can only provide an emergency buffer for China's power - battery production capacity and is difficult to achieve continuous production. "Even high - energy - consumption equipment such as large ovens can't be turned on during the day." Therefore, such a production rhythm is not the most cost - effective.
However, it must also be admitted that according to the risk characteristics of the automotive supply chain, once the dispersion of production capacity starts, it's hard to stop. After the US government suddenly imposed additional tariffs, many German companies in China also received notices to disperse their production capacity to Eastern Europe.
An official from a German fastener company revealed that after Trump took office, the US branch urgently stocked up a batch of goods from the Chinese factory, and this batch of goods is almost used up.
He is quite pessimistic about local manufacturing in the United States. "First, it's difficult to recruit local workers. Second, the quality control is not as good as in China. Third, the prices are much higher than those in China." However, if the tariff war continues, they can only start local production in the United States; otherwise, they can't bear the cost, "and the prices have to be increased every year".
For luxury automakers, the closure of supply - chain resources is also not conducive to product development.
Taking Mercedes - Benz and BMW as examples, these two automakers have one thing in common: they still choose to import some core electronic and electrical components from the United States or Europe. "Moreover, they basically won't consider localization in this area."
For example, the electronic sensors on the vehicle chassis that are closely related to safety. These sensors need to capture changes in vehicle speed, steering, and component status very sensitively and quickly.
A BMW R & D official told 36Kr that within BMW, Chinese employees hardly participate in the R & D and testing of any electronic and electrical components. Even if some components have been transferred to local production, the suppliers directly communicate with German R & D, and China has no say in this business.
Mercedes - Benz's R & D department said that the easiest part of hardware localization is production. The materials, mold - opening, and testing standards don't pose a threshold. The most difficult part to localize is actually the electronic and electrical part.
"There are some sensors and controllers, like airbags. They only work once. If they work, they can save lives; if not, the car owner may be injured or even die."
The supply - chain enterprises of these sensors and controllers are not unable to achieve local production in China. However, there are gaps in production lines and processes. For components with particularly strict precision requirements, luxury automakers still prefer to import from Europe or the United States.
On April 23, the signal from the US government to impose tariffs on China began to loosen. However, the automotive industry chain still can't relax its vigilance.
"When we make global industrial layouts, we can't only look at the dynamics in the next 1 - 2 years but also at the trends in the next 5 - 10 years or even longer." An official from a leading parts company said. Looking ahead, obviously, turmoil will become the norm. The independence of the industrial chain around regions is becoming a trend.
Some European luxury automakers are already promoting localization in China and the United States respectively. Producing in China for the Chinese market and producing in the United States for the US market have become important tasks at this stage.
If one day, even an industry as closely connected as the automotive industry can complete mutual "decoupling", it will undoubtedly be a more dangerous signal for the world.