The proposed rise in import duty is steadily becoming an issue for car manufacturers in the United States.
The import of vehicles isn’t the only challenge; the manufacturing and exporting of vehicles is under threat since key materials such as steel and aluminium are imported by carmakers. As the US starts exporting more and more vehicles, this challenge grows.
With this sword hanging over their heads, many car manufacturers are being agile in their approach. For example, there is a steady rise in the number of partly assembled vehicles, which clearly shows that carmakers are reinventing their existing manufacturing and logistics processes to adapt to these potential challenges in advance.
Partly assembled vehicles, or knockdown kits as they are better known, have a much lower tariff rate since they are considered as auto parts as opposed to finished vehicles. They can be assembled upon delivery in the intended market with local labour. That said, the tariff rates for certain knockdown kits, cargo vans being an example, are much higher in the US.
According to data released by the US Department of Commerce, exports of automotive parts rose 3.3% to $30.5 billion in the first quarter of 2018 in comparison to last year’s $29.5 billion.
This shift in strategy will have long standing impact in the automotive supply chain and logistics segment.