Four major automakers are reportedly considering moving some car-part manufacturing to China to avoid possible factory closures as U.S. tariffs put pressure on the industry, according to The Wall Street Journal.
Though President Donald Trump’s tariffs were intended to encourage domestic auto manufacturing, China’s domination of rare-earth magnets used in electric motors and the potential forthcoming shutdowns of domestic car manufacturing plants have some major automakers scrambling for a solution, the WSJ reported. Ideas being considered by the unnamed manufacturers reportedly include producing electric motors in Chinese factories or shipping domestic motors to China for magnets to be installed in order to navigate testy trade relations between Washington and Beijing.
“While efforts are underway to bolster supply chains and suppliers of these elements outside of China, this will take additional time and will not alleviate the immediate shortage of elements vital for automotive components used to produce vehicles here at home,” heads of the Alliance for Automotive Innovation and MEMA, the Vehicle Suppliers Association — organizations that represent the majority of leading automakers and part manufacturers — wrote to Trump in a letter in May, according to the WSJ.
The alternatives reportedly under discussion highlight just how dependent the U.S. is on China for the magnets. China supplies 90% of rare-earth magnets, and the strain of Trump’s tariffs has led to shortages of magnets and parts including them.
One Volvo plant in South Carolina already shut down in May, citing a “supply chain issue,” according to Auto Connected Car News.
More domestic auto plant closures are looming, as a Gartner analysis predicted in January that these closures will “redefine the car manufacturing map of the U.S. and Europe, making low-cost countries the major hubs in automotive production capacity and supply chain.”
China introduced regulations in April requiring companies to obtain export permits for magnets containing rare-earth metals in retaliation to the tariffs imposed by the U.S. Beijing was supposed to have relaxed export controls on rare-earth magnets under a 90-day tariff truce starting in May with the White House, but Washington alleges that China has delayed permit approvals for magnets anyways.
Manufacturing more gas-powered vehicles instead of electric vehicles (EVs) isn’t a viable solution, as strict fuel economy rules imposed on automakers mean that the companies could face fines if they produce excessive emissions. The magnets are crucial components in EVs and internal combustion engine vehicles also use them.
Another way to preserve limited magnet supplies is to switch back to older electric-motor designs that do not require rare-earth magnets, though automakers already moved away from these motors for the sake of efficiency and cost-effectiveness, automakers told the WSJ. Automakers are also looking at removing certain premium features, like adjustable seats that rely on multiple small electric motors or advanced audio systems that use rare-earth magnets, in response to the situation.
The White House did not respond to the Daily Caller News Foundation’s request for comment.
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