China auto part makers: UBS sees limited impact from US-Mexico trade tariffs

Chinese auto part makers, particularly those with plants in North America, are expected to see limited disruptions even if the U.S. imposes steep trade tariffs on Mexico, as recently threatened by President-elect Donald Trump.

UBS also noted that Trump’s threat of 10% tariffs on Chinese imports presented a limited impact on auto part exports from local plants, given that the 10% is below market forecast. 

For companies with plants in Mexico, UBS said that it will be difficult for U.S. manufacturers to replace their dependence on Chinese firms. The brokerage said that Chinese firms and their U.S. customers were likely to share tariff costs, after doing so during Trump’s first administration. 

High U.S. dependence also gives auto part makers more room to bargain over sharing costs, UBS said. 

UBS noted that some Chinese firms had plants in the U.S., lending them immunity from tariffs. Fuyao Glass Industry Group (HK:3606 ) already has a plant in the U.S. and plans to increase capacity in 2025, mitigating risks from Sino-U.S. trade frictions. 

“As Fuyao holds a global/US market share of c.35%/30%, and its US peers' scales are relatively small, we think Fuyao is unlikely to be replaced by overseas peers and could pass part of tariffs on to the downstream,” UBS analysts wrote in a note.

UBS also forecast little impact from tariffs on Huizhou Desay SV Automotive Co Ltd (SZ:002920 ) and Tesla supplier Ningbo Tuopu Group Co Ltd (SS:601689 ). For Desay, the brokerage noted that it had limited exposure to Mexico production, and was expected to see robust demand from local players such as Li Auto (NASDAQ:LI ) and Byd. Desay also has production capacity in Germany and upcoming plants in Spain and Indonesia.

Tuopu, which is a key supplier to Tesla (NASDAQ:TSLA ), is also little exposed to Mexico, and will likely be able to shift U.S. orders to upcoming plants in Malaysia and Poland.

Source: Investing.com