China may lose luster as low-cost parts source
Is China's bubble about to burst?
I'm not talking about the auto market, which seems certain to remain the world's biggest. But I am referring to China's status as the auto industry's low-cost source of components.
According to The Wall Street Journal, China's producer price index rose 5.9 percent in December, higher than economists expected.
As prices heat up, China's government appears to be paralyzed. It doesn't want to let the yuan float up, which would make exports less competitive. But a weak yuan pretty much ensures out-of-control inflation.
If you are buying wire harnesses for your North American assembly plant, which location looks more stable for your suppliers -- China or Mexico?
In general, North America is starting to look like a pretty good place to do business. J.D. Power and Associates predicts North American light vehicle production will approach 12.8 million units this year, up about 11 percent year-on-year.
Next year, production may rise another 11 percent to 13.9 million units. It's a living.