Four major automakers are racing to find workarounds to China's stranglehold on rare-earth magnets, which they fear could force them to shut down some car production within weeks.
Several traditional and electric-vehicle makers—and their suppliers—are considering shifting some auto-parts manufacturing to China to avoid looming factory shutdowns, people familiar with the situation said.
Ideas under review include producing electric motors in Chinese factories or shipping made-in-America motors to China to have magnets installed. Moving production to China as a way to get around the export controls on rare-earth magnets could work because the restrictions only cover magnets, not finished parts, the people said.
If automakers end up shifting some production to China, it would amount to a remarkable outcome from a trade war initiated by President Trump with the intention of bringing manufacturing back to the U.S.
As exports of rare-earth magnets have virtually ground to a halt, carmakers face hard decisions about whether they can continue to keep some plants operating, according to people familiar with the planning.
In May, industry groups representing most major automakers and parts suppliers told the Trump administration that vehicle production could be reduced or shut down imminently without more rare-earth components from China.
"While efforts are underway to bolster supply chains and suppliers of these elements outside of China, this will take additional time and will not alleviate the immediate shortage of elements vital for automotive components used to produce vehicles here at home," said the letter, which was signed by the heads of the Alliance for Automotive Innovation and MEMA, the Vehicle Suppliers Association.
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