Retail

The Price of Chinese Tariffs on the Automotive Aftermarket

Posted on June 20, 2019

The Auto Care Association took its turn in testifying and submitting comments about the effect of President Donald Trump's Chinese tariffs. Among the points made: "The price increases for repairs due to the tariffs are hitting low- and middle-income consumers the hardest."

Bill Hanvey, CEO and president of the Auto Care Association, is among 328 speakers who are testifying over a six-day period on the increase from a 10% to 25% tariff on goods imported from China. (This tariff would include every kind of tire — passenger, light truck, medium truck, farm and off-the-road.)

A snapshot: the auto care aftermarket:

  • $392 billion industry
  • 4.6 million employees
  • 3% of the American workforce

The point about the impact of the tariffs on consumers and families was made in the association's written comments submitted to the U.S. Trade Representative. Here's that full section:

"The average age of a vehicle on U.S. roads today is 11 years. It is extremely important for consumers to have access to a broad selection of cost-effective options to repair aging vehicles. The price increases for repairs due to the tariffs are hitting low- and middle-income consumers the hardest, forcing difficult choices as to whether to obtain needed repairs to their vehicle, or delay them in order to make other needed purchases for their family. These decisions could have serious implications for highway safety."

As he has in past testimony, Hanvey repeated the association's support to address China's unfair trade policies, saying those practices "jeopardize U.S. businesses' trade secrets, intellectual property and global competitiveness."

But China is also a "critical trading partner and manufacturing hub in our industry's supply chain," Hanvey said.

Some retailers are accepting the higher costs and raising consumer prices, Hanvey said, but "margin pressure and cash flow impact of financing the tariff are causing severe financial stress. Many suppliers pay a 25% tariff when goods enter the country but do not get paid by customers until the product is sold 360 days later."

In a debate on tariffs proponents suggest suppliers shift production elsewhere, and Trump advocates the result will be more American-made products. Hanvey says some members of the Auto Care Association have found suppliers in other countries. "Overall at a higher cost, but lower than sourcing from China considering the tariffs.

"For products without an alternate source already in existence in another country, it could take six to 18 months and likely years to find and qualify a new source.... Low volumes, broad ranges mean massive tooling investments that are extremely difficult to relocate."

For more information about the Auto Care Association’s trade initiatives, visit autocare.org/trade.

Related Topics: Auto Care Association, Bill Hanvey, Chinese imports, Chinese tariffs, President Donald Trump, U.S. Trade Representative

Comments ( 3 )
More Stories
Article Reasons Why Mergers and Acquisitions Happen in the Automotive Aftermarket

Among the first questions that a tire dealer asks when approached by a strategic or financial acquirer is, “Why do you want my business?” There are many good standard reasons why, and then there’s what I consider the underlying reason. First, some standard reasons.

Article Finding, Hiring and Retaining the Best People Is the Biggest Challenge for 2019-2029

It never fails. I have asked hundreds of business owners — 50% of them tire store owners — this question: “What is the biggest challenge you are facing in 2019?” One of the top three is always included in the title of this article, and most sum it up and say, “People.”

Article Job Descriptions Help Everyone: Let Your Employees Know What They Need to Do

Why does it seem that on some days, owners can’t peel themselves away from the counter and the service consultants are nowhere to be found? A tool you can use to keep everyone focused on what’s important is a job description.

Be the First to Know

Get the latest news and most popular articles from MTD delivered straight to your inbox. Stay on top of the tire industry and don't miss a thing!