*

Auto suppliers consider moving production closer to U.S.

due to

tariffs

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Bosch and Continental explore localizing production to

avoid

tariffs

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Panasonic aims to eliminate Chinese content from U.S.-made

batteries

By Abhirup Roy

LAS VEGAS, Jan 9 (Reuters) - Global auto suppliers are

working out how much of their production can be moved to the

United States, or closer to it, as a defense against tariffs

promised by President-elect Donald Trump, according to industry

executives at CES in Las Vegas.

The auto industry has already experienced eight years of U.S.

protectionism, from real and threatened tariffs during Trump's

first term and then more tariffs and the U.S. Inflation

Reduction Act under President Joe Biden. Most of those measures

were aimed squarely at China, in particular a proposal by the

Biden administration to bar Chinese software and hardware from

cars on U.S. roads.

But Trump has vowed to go much further, imposing a blanket

tariff of 10% on global imports into the United States and a far

higher 60% tariff on Chinese goods. In late November, he

specifically pledged a 25% tariff on imports from Canada and

Mexico when he takes office on Jan. 20.

Such high tariffs would be hard to pass on to consumers and

would render many auto parts produced in lower-cost markets

uneconomical, or in the case of China make it virtually

impossible to sell products in the U.S.

"Anyone can do the math," Paul Thomas, North American

president for Bosch, the world's largest car parts

supplier, told Reuters. "If it's 10%, 20%, 60% (tariffs) ... you

have to say, 'OK, how many scenarios make sense for that and

which ones do we act on?'"

"We've already started on a few of those even before he

(Trump) will take office."

Speaking on the sidelines of the CES tech conference, Thomas

gave a theoretical example of a generic electronic control unit

that Bosch might currently make in Malaysia or a similar market,

but now "we're looking at doing that in Mexico or Brazil ...

areas where we have a footprint already," he said.

Bosch is waiting until Jan. 20 to see what actually happens

before it makes any "significant decisions," Thomas added, a

point echoed by other suppliers and automakers.

During his first term, Trump used the threat of tariffs

against specific countries or even individual automakers to prod

them into boosting U.S. production.

When Toyota ( TM ) announced plans to produce the Corolla

sedan in Mexico for U.S. consumers in early 2017, Trump took to

Twitter, now known as X, saying "NO WAY! Build plant in U.S. or

pay big border tax."

Within a year, Toyota ( TM ) announced a joint $1.6 billion plant in

Alabama with Mazda ( MZDAF ) instead and Trump declared victory.

'NO. 1 OBJECTIVE'

Major suppliers responded to U.S. protectionism and massive

supply-chain shocks during the coronavirus pandemic by

localizing production to avoid parts shortages or the risk of

border taxes.

That process accelerated after the Biden administration passed

the IRA. That law was more carrot than stick, encouraging a

swarm of suppliers including Britain's Dowlais ( DWLAF ) to invest

more in the U.S. market as they pursued contracts with

automakers seeking EV subsidies - though the incoming Trump

administration aims to dismantle parts of the IRA.

Nikolai Setzer, CEO of Continental, told Reuters

that after years of localizing more production in each region

where it operates to serve nearby customers, the German supplier

is more "underexposed than the rest of the automotive industry

or our competitors."

But Continental is talking to its suppliers in North America

about whether alternative local components are available for

parts so the company can avoid tariffs. "Wherever we can further

localize, and it makes sense, we will do it."

Honda's ( HMC ) production capacity in Mexico is about

200,000 vehicles annually and 80% of them are exported to the

U.S. market.

Speaking at a roundtable at CES, Honda ( HMC ) Executive Vice

President Noriya Kaihara said that depending on tariff levels,

"we might have to consider that we're maybe changing production

location ... from Mexico to Japan, or Mexico to somewhere else."

"We have not formalized what we can do, but we are

elaborating what we will be able to do," Kaihara added.

The possibility of fresh high tariffs on goods from China has

added fresh impetus to suppliers looking to find alternative

sources. Panasonic Energy, which supplies EV batteries to Tesla

, has already been working to shift more of its supply

chain to North America including via supply deals with synthetic

graphite anode materials producer Novonix ( NVX ) and Canadian

natural graphite manufacturer Nouveau Monde Graphite ( NMG ).

But Allan Swan, Panasonic Energy's North American president,

told Reuters that with Trump due to take power the company is

accelerating plans to eliminate all Chinese content from its

U.S.-made batteries.

Swan said Chinese materials currently make up a small

portion of its supply chain, but the aim is "not to have the

supply chain dedicated from China."

"That's the No.1 objective," he added.