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Shifting Trade Rules and the Future for North America’s Auto Industry

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Two major initiatives by the US to overhaul trade rules could have a massive impact on North America’s automotive manufacturing industry. Here’s how companies should prepare.

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Shifting Trade Rules and the Future for North America’s Auto Industry

  1. 1. SEPTEMBER 2018 Exhibits from the BCG Article Shifting Trade Rules and the Future of North America’s Auto Industry
  2. 2. 1 Copyright©2018byTheBostonConsultingGroup,Inc.Allrightsreserved. Exhibit 1 | In the Passenger Car Trade, the US Has a $126 Billion Deficit, Mainly with the EU, Canada, Japan, and Mexico -31 Japan 8 -41 -44 -44EU -27 -40 4 1 Canada -29 15 -35 2South Korea -16 Mexico -5Others 20 -14 25 Sources: Trade Map; BCG analysis. Note: Data consists of import and export values of HS Code 8703. Total US car exports, 2017: $54 billionTotal US car imports, 2017: $180 billion Imports Exports
  3. 3. 2 Copyright©2018byTheBostonConsultingGroup,Inc.Allrightsreserved. Exhibit 2 | Four Possible Scenarios for the North American Automotive Industry Source: BCG analysis. US out of NAFTA New NAFTA auto rules Section 232 duties Imposed Tough rules, easy out • OEMs and suppliers may choose to pay low US duties rather than comply with complex new rules • No impact on supply chains involving the EU, Japan, and South Korea • Higher consumer prices for some models Radical disruption • Deep impact on supply chains involving Canada, Mexico, the EU, Japan, and South Korea • Higher manufacturing costs passed through to US consumers • Loss of US export competitiveness Fortress North America • No impact on compliant Canadian and Mexican imports • Significant impact on supply chains involving the EU, Japan, and South Korea • Movement of some output to higher-cost NAFTA factories to avoid duties Muddling through • Low US duties assessed on noncompliant Canadian and Mexican imports • No impact on supply chains involving the EU, Japan, and South Korea • Higher consumer prices for some models Not imposed 1 2 3 4 Impact on the North American auto industry highlow
  4. 4. 3 Copyright©2018byTheBostonConsultingGroup,Inc.Allrightsreserved. Global recession Exhibit 3 | The Ability to Shift Motor Vehicle Production to the US is Limited: Factories Are Already Operating at Nearly Full Capacity Source: Board of Governors of the Federal Reserve System. Note: Average of each year's quarter values; seasonally adjusted data. 79 8685 81 79 76 69 64 44 57 71 7980 8585 80 0 20 40 60 80 100 20022001 2003 2004 2013 2015 2017 +35% points 20162014201220112005 20092008 20102007 73 2006 Significant tightening since recession Manufacturing capacity (%)

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