(JW Insights) Apr 12 -- Chinese car-parts makers are facing growing pressure from overseas customers to set up factories outside the country as mounting trade tensions and three years of Covid lockdowns make them wary of relying too heavily on China, reported Bloomberg on April 11.

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

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 time after China ended its Covid Zero restrictions, the first thing he asked about was the company’s plans to set up an overseas plant, voicing his concerns about rising tension between China and the West.

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 production 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 is plowing an initial $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.

China’s Sunrise Elc Technology(兴瑞电子科技), which supplies electrical components to German auto-parts maker Robert Bosch GmbH and Japan’s Panasonic Holdings, has already established a plant in Vietnam that makes set-top boxes for the consumer market overseas. On top of speeding up plans to acquire related credentials to produce auto parts in the Vietnam factory, it’s seeking sites in Europe and the US, according to Bloomberg.

For the first time in about 25 years, China isn’t a top three investment priority for a majority of US firms, an American Chamber of Commerce in China survey showed. The survey also found the proportion of companies moving supply chains elsewhere, or considering doing so, had almost doubled from a year ago.

Minth Group(敏实集团), which makes structural body parts for cars along with decorative components and interior trims, last year signed an agreement with Renault SA to set up a joint venture to make battery boxes at a plant in Ruitz, France; It broke ground on a factory in Poland that it will operate with Sanhua Holding Group(三花控股集团). Those add to factories in Thailand, Germany, Serbia, the Czech Republic, the UK, Mexico and the US, said the report from Bloomberg.

(Gao J)