The auto industry is begging the US government to make it easier to import critical parts from China

·3 min read
Workers at Tesla factory
Tesla says it can't get a critical battery material anywhere but China and is pressing the US to waive tariffs.David Butow/Getty Images
  • Auto suppliers and manufacturers are asking the US to drop tariffs on a range of Chinese goods.

  • Tesla and SK Innovation say they can't get graphite for electric-car batteries anywhere else.

  • President Trump slapped huge duties on hundreds of billions worth of Chinese imports in 2018.

Auto suppliers and manufacturers, including Tesla, are urging the US government to waive tariffs on a range of critical components from China, especially those for electric-car batteries.

The pleas come in a hectic period for global supply chains. A record number of container ships are stuck off the California coast, and all manner of household and industrial items are in short supply. In the automotive world, supply chain snarls and shortages — particularly involving computer chips — have forced carmakers to cut production drastically, sending new-car prices sky high.

In October, the US Trade Representative began accepting public comments from companies seeking tariff exclusions on certain Chinese imports that were hit with extra duties during President Trump's trade war with the country in 2018. It previously granted 2,200 exclusions, but most of those expired in 2020.

USTR said it would consider waiving tariffs that impact products that can only be bought from China or will "result in severe economic harm to the commenter or other US interests." The public comment period ended Wednesday.

Tesla, for one, argued in three comments to USTR on Wednesday that it can't get the artificial or natural graphite it needs for battery packs anywhere outside of China, CNBC first reported.

"Tesla has concluded that no company in the United States is currently capable of producing artificial graphite to the required specifications and capacity needed for Tesla's production," the electric-car maker said.

Several times over the last year, Tesla CEO Elon Musk and other company executives have explained how shortages of parts and ports have impacted Tesla's manufacturing. The company has raised the prices of its cars by thousands of dollars over the last year, and the wait time for certain models has dragged out to more than a year.

SK Innovation, the South Korean battery manufacturer that supplies cells to Ford and Volkswagen, made a similar entreaty. The company recently announced a joint venture with Ford, BlueOvalSK, for three plants that would supply the automaker with batteries for its growing lineup of electric vehicles.

Dozens of other automotive suppliers, large and small, are asking for respite from tariffs on all the myriad switches, sensors, motors, and other parts that go into a vehicle.

Manufacturing juggernaut Magna and its subsidiaries want exclusions for electric motors that make car seats adjustable, circuit boards used in advanced safety systems, and steel shafts used in automatic transmissions. Bosch wants the same for wheel-speed sensors used in its anti-lock braking systems. SMR Automotive Systems, which supplies rear-view and side-view mirrors to automakers, is asking for a waiver for a certain type of mirror.

"All rearview mirror glass vendors for auto manufacturers are located outside the United States," the company said.

Some industry watchers argue that the supply chain crisis is already getting better. However, some analysts say the shortage of computer chips and its impact on the price of new cars could last for years. Tariff relief for the auto industry could help to relieve some of that upward pressure on pricing.

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