Tier 1 auto suppliers are refusing to take new orders from automakers unless their get their U.S. tariffs costs paid up front.
French suppliers Novares and Valeo, both with factories in Mexico providing parts to automakers in the U.S., say their customers must pay the full amount of any tariffs slapped on the parts they are contracted to make.
With current tariffs on all automotive imports running at 25%, that’s an immediate hit to the automakers’ bottom line that suppliers are refusing to mitigate.
Suppliers say they are already under pressure from the increasing switch to less complex battery-electric vehicle powertrains with fewer parts required and are in no position to absorb any tariff charges.
Pierre Boulet, chairman of Novares, which supplies plastic parts to one in three vehicles produced worldwide tells Reuters, “For us, it's simple,” either payment in advance “or no customs clearance.”
Meanwhile Valeo, a specialist in driver-assistance and lighting systems, also demands its automaker and auto parts distribution companies pay the full tariff cost.
“We are working to obtain full compensation for the new customs duties, passing on 100% of the corresponding costs to our customers and we have already obtained the agreement of more than 50% of them,” says Valeo chief executive Christophe Perillat.
Only a portion of imports from Mexico and Canada are currently affected by the duties, as components that comply with the 2020 USMCA free-trade agreement are exempt, but more products could face duties May 3.
