The last decade saw one of the worst economic recessions in US history since the great depression in 1930’s. The manufacturing sector in particular faced calamitous circumstances due to dwindling demand for goods and soaring costs of production. Auto parts industry has not been an exception.

According to the department of commerce report on the auto parts industry, in the year 2011 the auto parts suppliers incurred heavy debts and were pushed against the wall due to production cuts by major auto manufacturers.

According to the same report over fifty suppliers filed for protection in 2009 and almost two hundred were liquidated.

The auto mobile sector is a significant contributor to the Nation’s GDP representing an overall contribution of five percent and employs an estimated six hundred and fifty thousand employees in the US.

car production

Chinese Production

China being the current largest automobile producer in the world enjoyed a comfortable and steady growth over the period between 2007 and 2009.  The production grew by almost ninety seven percent during the same period.

Analysts confer that the success of Chinese producers stems primarily from the inability of global consumers to afford comparatively expensive European and American vehicles.

In the year 2010 China topped with an eighteen million units produced domestically with US on the second place producing eight and a half million units. Producers in China afford the luxury of lavish subsidies and tariff relaxations from the government.

The Chinese government has agreed to lower the tariff on imported auto parts to 10%. The government also provided 27.5 billion dollars worth in direct subsidies.

China also has the advantage of having a dominating control over the supply of rare earth metals. These metals are used in the production of Hybrid vehicles. Chinese manufacturers take advantage of the manipulation of the domestic currency which reduces cost of imported parts by an additional twenty five to thirty percent.

US Production

The year 2010 proved to be a consolation for the US suppliers. This was primarily due to the fact that the effects of global downturn were wearing off. Government measures led suppliers to live through the monstrosity of the credit crunch.

The dark ages however are not over yet and the sword of Chinese takeover is still hanging over the heads of international producers. Since 2000 Chinese auto parts exports have aggrandized by nine hundred percent.

According to a report by the Economic Policy Institute the US lost more than four hundred thousand jobs between the year 2000 and 2011.

The US industry has manifested amelioration over the last couple of years by gaining almost sixty thousand jobs since the dip in 2009. It still needs to consolidate and improve the momentum of reclamation.

The UK automotive industry also has an aggregate capacity in excess of two million units annually. The demand however is only about one half of the capacity. Analysts argue that the US auto makers need to benefit from the stabilizing trend in global markets by adopting a dynamic marketing approach in the Asian markets.

Expanding production facilities in Asian countries can cut direct costs of production significantly. As part of this strategy GM is planning to sell Chinese made vehicles in the US. It intends to increase the magnitude of sales to fifty thousand units annually by the year 2014.