Cathay Pacific Haitong: Chinese automobile manufacturers still have obvious advantages in their layout and cost control capabilities in the US

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that due to weak profit margins and cash flow levels, the competitiveness of US parts companies in the global market is gradually declining; the US automobile supply chain's dependence on imports continues to rise, the parts trade deficit continues to expand, and the proportion of local parts used in North America has continued to decline for ten years. Although the US announced a 25% tariff on imported automobiles and parts, it is difficult for the US automobile manufacturing industry to return as a whole due to many problems in the local manufacturing environment and the unique problems of local companies. In contrast, Chinese automobile manufacturers still have a clear comparative advantage due to their localized layout and cost control capabilities.

Cathay Pacific Haitong's main views are as follows:

The US automobile manufacturing environment faces multiple difficulties

The high cost of manufacturing equipment and the rigid rise in labor costs are the core factors limiting the return of the manufacturing industry. Taking heavy trucks and passenger cars as examples, the fixed cost of bicycles for US OEMs is significantly higher than that of Chinese companies, reflecting the low efficiency of equipment investment and high depreciation pressure. On the labor side, the annual salary in the manufacturing industry is about 5 times that of China. Combining strong trade unions to push up wage levels and further reduce profit margins. Furthermore, the overall ROE of the US automobile industry is low, far inferior to high-return industries such as technology, and weaker than major US stock indices, making physical investment less attractive.

American automobile companies face a unique set of structural challenges. On the one hand, due to weak profit margins and cash flow levels, the competitiveness of American parts companies in the global market is gradually declining. On the other hand, the degree of dependence of the US automobile supply chain on imports continues to rise, the parts trade deficit continues to expand, and the proportion of local parts used in North America has continued to decline for ten years, reflecting the trend of outward manufacturing and weakening local support capacity. Furthermore, the supply of talent is also a core bottleneck. Demand for high-end engineers in the automotive industry continues to rise in electrification and intelligent transformation, but compared to the higher-return technology industry, the appeal of automotive jobs is limited, and a large number of engineering graduates from the US are going to IT and other fields.

Localization is the key to the development of Chinese parts companies in the US

Currently, Chinese auto parts companies generally adopt the “local R&D, local manufacturing, local delivery” operating model in North America, and actively establish a closed loop of regional production, supply and marketing. By setting up factories, introducing local teams, and increasing the proportion of local procurement, enterprises effectively avoid tariffs and geopolitical risks. Cathay Pacific Haitong believes that Chinese parts companies still have a competitive advantage in the US. Improved localization capabilities have not only avoided tariff risks, but also enabled Chinese enterprises to show stronger support and cost advantages in the North American electrification trend.

Over the past ten years, the US automobile manufacturing industry has shown a systematic contraction

Production fell from 4.161,900 units in 2015 to 1,425,600 units in 2024, a cumulative decrease of 66%; sales also fell from 5.5951 million units to 2.089 million units, a decrease of 64%. Over the same period, US automobile exports fell from 1.31 million to 830,000 units, a decrease of 36%. On the import side, the US automobile and parts import price index has been rising for five consecutive years since 2020, reaching 121.18 in 2024, with a cumulative increase of more than 9%. At the macro level of contribution, although the automobile manufacturing industry's output value reached a high of 301.5 billion US dollars in 2023, its share of GDP fell from 12.12% in 2015 to 9.94% in 2024. At the same time, the industry's 10-year CAGR was only 3.03%, which is significantly lower than the overall US GDP of 5.33% during the same period.

Aspect of the target

We recommend companies with mature layouts in the US, such as Nexteer (01316), Joyson Electronics (600699.SH), Minshi Group (00425), CIMC Motors (301039.SZ,01839), and Jifeng (603997.SH).

Risk Alerts

International trade frictions continue to escalate, global passenger car sales fall short of expectations, and raw material prices have risen sharply.