Ports See Growth in Exports of Partly-Assembled Cars

Date: Tuesday, June 5, 2018
Source: Wall Street Journal

The burgeoning growth in U.S. auto exports may be coming in separate parts.

U.S. auto makers are exporting more cars this year, even as proposed tariffs on imported vehicles, and key materials such as steel and aluminum, are raising concerns over global supply chains.

Some American ports say they’re seeing even faster growth in partly-assembled vehicles, however, a sign that manufacturers are resetting their factory and overseas distribution strategies to adjust to growing threats of tariffs.

At the Georgia ports of Savannah and Brunswick, which handle exports for several large manufacturing operations in the Southeast, auto exports are up 12% in the current fiscal year while auto-parts exports have risen 56%. Partly-assembled cars, which are completed by workers in the destination country, are counted as auto parts.

“Clearly, auto parts is way up,” said Georgia Ports Authority executive director Griff Lynch, noting auto-parts tonnage at the Port of Savannah reached 101,212 tons during the nine months ending in March, up from 64,779 tons during the same period a year earlier.

For auto-handling ports, the strategy marks a shift since the partly assembled vehicles can’t be driven onto specialized ships known as car carriers. Instead, the cars generally are packed into containers and loaded onto container ships like other cargo.

 

Cars exported in partially-assembled form, known as “knockdown” kits, are subject to different, often lower, levies than full cars. China recently said it would lower its tariff rate on auto imports to 15% from 25% while lowering the rate for auto parts—a category which includes knockdown kits—to 6% from between 8% and 25%.

President Donald Trump’s threat to impose new tariffs on imported automobiles is putting the role of U.S. auto manufacturing in global trade under greater scrutiny. Japanese and German auto makers have pointed to the billions of dollars in investments they have made in U.S. factories and BMW AG , which has a plant in South Carolina, and Daimler AG , which produces Mercedes-Benz models in Alabama, say they also export big volumes of vehicles from the U.S.

Daimler says its exports of sport-utility vehicles made in Alabama make it the second-largest automotive exporter in the U.S.

According to Commerce Department trade data, exports of motor vehicles and parts rose 3.3% to $30.5 billion in the first quarter of 2018 from $29.5 billion a year earlier.

Several auto-industry analysts said they don’t explicitly track exports of partially-assembled kits, as it remains a smaller slice of the overall auto market. But the operation could grow as changes in tariffs lead manufacturers adjust their supply chains to new trade economics.

The U.S. imports many knockdown kits on certain types of vehicles that have higher tariff rates, such as cargo vans, analysts said.

Kristin Dziczek, an analyst with the Center for Automotive Research, said knockdown-kit exports also provide manufacturers a way to enter emerging markets where the auto industry is underdeveloped. Setting up final-assembly operations is one way to gain a foothold in new markets, Ms. Dziczek said, which helps to develop the supplier base and build out manufacturing in those countries.

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