Auto parts makers join offshore factory push

China’s status as the world’s factory and its bid to regain the trust of global business faces new threat

Chinese car parts makers are facing growing pressure from overseas customers to set up factories outside the country as moun ng trade tensions and three years of COVID lockdowns make them wary of relying too heavily on China.

Carmakers from Europe and elsewhere are making direct overtures to manufacturers of everything from cooling components to brake systems and auto charging parts, pressing them to establish plants in places like Vietnam and Indonesia so they can s ll benefit from their exper se and long-held rela onships but avoid the risks China poses right now, according to a number of suppliers interviewed by Bloomberg News.

While some interna onal names like Airbus SE and Tesla Inc. are doubling down on Asia’s biggest economy, the shi is an increasing threat to China’s status as the world’s factory and its bid to regain the trust of global business amid the unpredictability of President Xi Jinping’s rule.

For one manager at a Jiangsu-based maker of electric-car charging components, the pressure is crystal clear. When his key European client visited for the first me a er China ended its COVID Zero restric ons, the first thing he asked about was the company’s plans to set up an overseas plant, voicing his concerns about rising tensions between China and the West.

On the taxi ride from the airport to the factory, the manager and his client agreed to visit Vietnam and Thailand to scout for opportuni es. “I don’t even like taking planes,” said Wang, who asked to be iden fied by only his surname so as not to reveal his employer or main customer. “But it looks like I have no choice. Move out, or lose the business.”

It’s not just auto parts makers feeling the pressure of what has come to be known as China+1: the push to establish at least one factory outside the home base of China. Most notably, Apple Inc. and its suppliers are moving produc on out of the country. Foxconn Technology Group plans to invest about $700 million on a new plant to make iPhone components in India, while AirPods maker GoerTek Inc. is plowing an ini al $280 million into a new Vietnam facility and considering expanding in India.

“Firms are moving away from a cost-driven strategy to a resilience-driven strategy,” said Ben Simpfendorfer, a partner at Hong Kong-based consultancy Oliver Wyman. “The resilience is by adding an extra factory or more in a different part of the world,” he said, adding that the pandemic and trade tensions have brought into sharper focus the fragility of global supply chains.

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