Although China's production costs have been increasing in recent years, American Axle & Manufacturing, Inc. remains committed to expanding its procurement of spare parts from the country. Steven Proctor, the company’s Asia operations president, emphasized that "from a powertrain perspective, China is still an attractive low-cost manufacturing hub." He noted that approximately 8% of the spare parts used by Axle in North America are currently sourced from China. The Detroit-based company is actively working on developing new Chinese suppliers, although Proctor did not disclose specific targets for increasing the share of parts purchased from China. Despite rising costs in China, which have somewhat reduced the competitive edge of shipping auto parts to North America, the company continues to see value in sourcing from the region. Since the removal of the yuan-dollar exchange rate peg in 2005, the renminbi has appreciated by roughly 20%, meaning more dollars are needed to buy the same amount of Chinese-made components. In addition, last year China eliminated sales tax rebates on thousands of export goods, and in January 2024, new labor laws were introduced, ensuring better protections for workers, including contracts, social security contributions, and overtime pay. Wages in China have also been rising steadily. Before the implementation of the new labor laws, wages in coastal provinces increased by about 8% annually over the past three years. However, Proctor pointed out that even with these increases, China still offers lower labor costs compared to other regions. He provided an example: a gear cutter operator in Mexico earns between $4 to $5 per hour, including benefits, while in a joint venture between Anhui Axle and Anhui Jianghuai Automobile Company, the equivalent hourly wage is only $1.50 to $1.70. Even if labor unions in the U.S. make concessions, the hourly wage for a union worker in Michigan remains as high as $35 to $40, including benefits. American Axle specializes in producing driveline components, metallic gear systems, driveshafts, and support shafts—products that require significant manual labor in casting and machining. Proctor stated, "For the products we manufacture, the cost structure in China is still favorable." It’s important to note that the company does not plan to increase the volume of goods exported from its Chinese factories. Instead, parts sourced from China are likely to be produced by subcontractors under the American Axle brand. Overall, despite rising costs and evolving regulations, China continues to play a key role in American Axle’s global supply chain strategy. The company believes that, at least for now, the advantages of manufacturing in China outweigh the challenges.

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