Although China's production costs have been on the rise in recent years, American Axle & Manufacturing, Inc. remains committed to expanding its procurement of spare parts from the country. Steven Proctor, the company’s president for Asia operations, emphasized that, despite rising costs, China still offers a favorable environment for low-cost manufacturing when it comes to powertrain components. According to Proctor, approximately 8% of the spare parts used by Axle in North America are currently sourced from China. The company is actively working to develop new Chinese suppliers, though Proctor did not provide specific targets for increasing the percentage of parts purchased from the region. Over the past decade, the cost advantage of sourcing auto parts from China to North America has gradually diminished. Since the removal of the yuan-dollar exchange rate peg in 2005, the renminbi has appreciated by roughly 20%, making Chinese goods more expensive for U.S. buyers. In addition, last year China eliminated tax rebates on thousands of export products, and new labor laws introduced in January this year have increased compliance costs for companies operating in the country. Wages in China have also risen significantly. Before the implementation of the new labor law, workers in coastal provinces saw annual wage increases of around 8% over the past three years. Despite these trends, Proctor believes that China still holds a competitive edge due to its relatively lower labor costs. He provided an example comparing wages in different regions: in Mexico, the hourly wage for a gear cutter operator—including benefits—ranges from $4 to $5 (about 27 to 34 yuan). In contrast, in a joint venture between Anhui Axle and Anhui Jianghuai Automobile Company, the same job pays only $1.50 to $1.70 (RMB 10 to RMB 12) per hour, including benefits. Even if labor unions in the U.S. were to make concessions in the near future, union workers in Michigan still earn between $35 to $40 per hour (approximately 240 to 274 yuan), which is significantly higher than what is seen in China. American Axle specializes in the production of driveline components, metallic gear systems, driveshafts, and support shafts—products that require extensive casting and machining processes. Proctor noted that while China’s manufacturing cost structure has evolved, it remains a viable option for certain types of production. It’s worth noting 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. In summary, even with rising costs and regulatory changes, China continues to play a significant role in American Axle’s supply chain, especially due to its lower labor expenses and ongoing efforts to build local supplier relationships.

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