To avoid tariffs, Honda shifts SUV production to China

Dive Brief:

Honda by the end of 2018 will shift production of the Acura RDX to factories in China from their facility in Ohio to avoid the 40% Chinese tariff on U.S auto imports, Nikkei Asian Review reported.
Honda recently began production of the new RDX at its Guangzhou Automobile plant, one of two joint ventures it has in China. Honda was considering switching production for Chinese market vehicles from the U.S. before July when Washington and Beijing began imposing tit-for-tat tariffs.
China's 25% tariff on imported vehicles before the trade war was considered high. In July, Beijing lowered tariffs to 15% on imports from some countries, but the rate for imports from the U.S. was raised to 40%.

Dive Insight:

The entire automotive supply chain faces rising prices and uncertainty around supplies as the trade wars linger. For example, steel prices have increased 50% since the tariffs went into effect. Meanwhile, thousands of U.S. companies are waiting on the U.S. Department of Commerce to review requests to exclude products from the tariffs.

The move could reduce output from three Honda plants in Ohio that produce engines, transmissions and all-wheel-drive systems for the Acura model, according to Zero Hedge. The tariff tiff is leading other automakers, including Volvo, to reconsider their plans for U.S. production bound for the Chinese market.

While the vehicles produced in China won't be subject to the tariffs, some components might still be subject to the additional tax. Other automakers, including BMW Group and Daimler, hiked the sticker price of vehicles imported to China from the U.S. to cover the higher import costs.

Honda hopes to capture a larger share of the market with lower prices from domestically produced vehicles. The new Acura RDX made in China is expected to be about 20% cheaper than the current model, which lists for 399,800 yuan ($57,500). Honda is targeting 10,000 sales for the RDX, or about 10 times the previous volume.

Honda sold 1.45 million units in China in the 12 months ending March 2018, representing about 30% of the company's overall production. Honda produced 1.64 million vehicles in the U.S. during the same period.