Auto Parts Distributors NAICS 423120

Jun 17, 2025 - China Stranglehold on Rare-Earth Magnets Threatens US Auto Makers

• A US trade war with China is affecting car manufacturers in numerous ways, with one of the most challenging being China’s near total control over rare-earth magnets necessary for electric vehicle (EV) manufacturing and certain traditional car systems (and virtually all other electronics). China controls 90% of rare earth metals such as dysprosium and terbium, elements used in magnets so they operate at high temperatures. Exports of rare-earth magnets from China have all but halted since April amidst the tariff squabble with the Trump administration. Auto manufacturers worry they can’t keep production lines moving without the magnets and might have to shut down production. Some are considering outside-the-box solutions including shifting all engine production to China, or shipping American-made EV engines to China so the magnets can be installed. Any of those options will run afoul of Trump’s trade goals and would significantly increase costs already high due to tariffs.
• The Trump administration slapped 25% tariffs on all imported automobiles on April 2, claiming the levies will spur auto factory building in the US. The tariffs will apply to all imported passenger cars and light trucks. Certain auto parts will also be subjected to the levies such as engines, electrical components, and powertrain parts. This is in addition to reciprocal tariffs Trump also levied against specific countries that are key US partners in auto manufacturing. According to Cox Automotive, the tariffs will increase the price of imported passenger vehicles by an average of $6,000. In 2023, the US imported about $120 billion worth of automotive products from Mexico and Canada - roughly half of all US vehicle and parts imports. The move will likely spur retaliatory tariffs from other countries against the US, potentially driving auto prices even higher.

• Struggling retailer Advanced Auto Parts is aggressively moving on a corporate restructuring in early 2025 to turn around years of floundering sales and ranking fourth among its competitors. Its closing of 700 corporate-owned and independent stores represents 10% of corporate locations and 20% of indies. It is also closing four distribution centers and simplifying its supply chain from big distribution hubs to smaller regional hubs in order to get the vast amount of parts the company must carry to customers as quickly as possible. With recession worries looming, auto parts retailers typically benefit from consumers putting off new car purchases in favor of repairing a current vehicle. But the trade war between the US and its North American neighbors is a wild card that could increase costs and blunt any gain to be had in the auto parts industry.
• Inventories and the inventory/sales ratio for motor vehicles and parts wholesalers rose 4.1% and 1.7% in November, respectively, year over year, per the Census Bureau. Sales for motor vehicles and parts wholesalers increased 2.3% in November 2024 year over year but fell 7.3% from the previous month, according to the Census Bureau. Producer inflation for auto parts distributors grew 4.7% in November 2024 compared to a year ago, according to the Bureau of Labor Statistics (BLS). Auto parts distributors industry employment increased 0.8% in October 2024 compared to a year ago. Average wages for nonsupervisory employees in the industry grew 9.6% in October 2024, reaching $27.67 per hour, per the BLS.