Auto Parts Manufacturers NAICS 3363

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

• 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.
• High new car prices and tariffs on foreign automobiles and auto parts are causing consumers to increasingly drive their current cars longer. According to S&P Global, the last two years have seen a steady increase in vehicle age, with Americans keeping their cars for 12.8 years on average. Scrappage rates - the percentage of vehicles removed from operation - have held steady despite new vehicle registrations topping 16 million in 2024. Both statistics indicate an aging American fleet on the roads, which is good for auto repair shops and parts manufacturers, but bad news for manufacturers and dealerships. Maintenance demands are expected to soar in the coming years if the trend holds and prices continue to rise. Online automotive resource Edmunds says the average price of a new car is about $47,000, yet almost half of new car buyers want to spend $35,000 or less for a vehicle.

• After the Trump administration’s 25% tariff on imported auto parts went into effect in late April, the government altered the levies to soften price shock and give the industry more time to adjust. The new auto part tariffs offer a partial reimbursement to manufacturers during the next two years if the final assembly of an automobile is in the US, regardless of the parts’ origin. The rebate will be 3.5% relative to the sales price for domestically assembled vehicles for the first year, and then fall to 2.5% for the second year. It also prevents secondary tariffs on other products, like aluminum and steel, from stacking up on an automaker. Despite this, automobile cost hikes will still be significant due to the tariffs, anywhere from $2,000 for the least impacted cars up to $15,000 for the most, according to an Anderson Economic Group analysis.
• Employment by auto parts manufacturers fell 1.9% in November 2024 year over year while labor costs increased, according to the US Bureau of Labor Statistics (BLS). Average wages for nonsupervisory employees at auto parts manufacturers were up 12% in November 2024 year over year, reaching $30.07 per hour. The Producer Price Index for auto parts ticked up a slight 0.7% in December 2024 compared to a year ago. That number will skyrocket in 2025 if the Trump administration follows through on 25% tariffs on Mexican and Canadian imports. There is no such thing as an automobile fully made in the US. Virtually all cars contain parts from Mexico and Canada, and billions of dollars worth of auto merchandise crosses North American borders every year. Industry analysts expect tariffs to increase a car’s price by an average of $3,000.