Investing.com – The auto sector accounts for about 11% of global trade in manufactured goods, but a storm of rising tariffs is likely to lead to a more complicated trade environment, according to analysts at Bernstein.
The automotive industry boasts one of the most complex supply chains in the world, with multiple layers of suppliers and about 15,000 parts in a typical vehicle. Decades of low tariffs have supported global supply chains, with tens of thousands of components crossing the globe through multiple layers of suppliers to create a finished vehicle.
China may be the giant of global trade, but Europe is the king of the auto industry, Bernstein noted.
While most EU car exports go to other EU countries, the EU accounts for 34% of final car exports and 29% of exports of the wider sector including components, trucks, motorcycles and engines.
China, the United States, Japan and Mexico each account for about 17% of exports.
The shift from traditional internal combustion engine vehicles to electric vehicles is underway, and with China dominating battery manufacturing – likely to reach around 70% of production capacity by 2030 – this points to a further Chinese role in the auto trade.
The shift to electric vehicles brings other changes to logistics – a 30% reduction in the number of components in a car means fewer items need to be moved, but companies in this sector need to create and manage new flows of goods, and flows of spare parts will continue.
Moreover, the decades-old political consensus in favor of increasingly free trade is dead, especially when it comes to electric vehicles. The United States doubled tariffs on electric vehicles from China to 100% in August 2024, and the European Union imposed tariffs of up to 38% starting in July 2024.
China has indicated it will respond in kind, while other countries such as Turkey and Brazil have also taken protectionist measures.
Bernstein said tariff increases would likely change the structure of global auto supply chains, with more goods likely to flow through third countries rather than directly from China to the US/EU.
“We expect a more complex trading environment to support demand for logistics services, leading to growth in the freight services revenue group,” Bernstein added.
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