XUAR and the Auto Industry

KEY MATERIALS MINED OR PROCESSED IN THE UYGHUR REGION

Chinese auto parts manufacturers play an even larger role in the sector than would be evident at first glance. Many of the top global car manufacturers are indebted to mining, refining, or manufacturing undertaken in the PRC. China processes most of the world’s iron into steel, bauxite into aluminum, and lithium and cobalt into battery-grade materials.[1]

The PRC conducts a lot of that environmentally damaging and energy-consuming work in the extraordinarily repressive environment of the Xinjiang Uyghur Autonomous Region (or XUAR or Uyghur Region). 

The automotive industry relies on dozens of raw materials in the production of vehicles.[2] About 60% of the typical passenger vehicle is made of iron and steel, and about 12% aluminum.[3]  Both steel and aluminum are used in the construction of the car’s frame as well as in the manufacture of many other essential parts. Aluminum and magnesium alloys are increasingly replacing steel in some parts manufacturing because of their comparable lightness, which improves fuel efficiency.[4] Batteries for traditional internal combustion engine (ICE) vehicles require lead, and electric vehicle (EV) batteries require lithium, graphite, and other elements. Copper and nickel are used in electromechanical aspects of the car to increase conductivity and reduce wear.[5]

The materials used in the manufacturing of automotive vehicles tend to be mined and processed in some of the most remote places in the world, often under horrific labor and environmental conditions. Indeed, a 2022 industry report on the Chinese auto parts industry indicates that the XUAR is ranked third in China for production of these non-ferrous metals that are essential to automotive manufacturing.[6] This is only in small part due to the raw materials resources of the region. To a much greater extent, it is because of the incentives the government has provided to move processing of those materials closer to coal reserves and laxer regulatory contexts. Xinjiang’s industrial sector is characterized by coal-based energy used in the processing, hazardous working conditions, and diminished rights of workers.[7]

While the Uyghur Region is not necessarily rich in all of the raw materials central to automotive manufacturing, the PRC government has dedicated significant resources to moving the processing of these raw materials into the Uyghur Region. In both the 13th and 14th Five-Year Plans (spanning the years 2016-2026), the XUAR and XPCC governments emphasized the importance of expanding the region’s processing of the materials most critical to the auto industry, namely iron, steel, and non-ferrous metals. The automotive sector is explicitly highlighted as a target industry for these endeavors.[8] The central and regional governments have provided extraordinary incentives for companies to move their raw materials processing out to the Uyghur Region, where labor and environmental standards are enforced less stringently. Expansion of mining, processing, investment, and exports in the region are all of concern to automotive companies.

The first several chapters of the report zoom in on three materials that are central to car part and whole car manufacturing – steel, aluminum, and copper – to represent the critical role the Uyghur Region plays in the production of our cars. In the process, we uncover the extraordinary rights violations that are being inflicted on Indigenous Uyghur, Kazakh, and other minoritized people of the region by the companies that are among the most significant miners and processors of those essential raw materials. Examined together, it becomes clear that a vast array of forced-labor-tainted materials from the Uyghur Region are making their way into cars and other vehicles around the world, including in the U.S., where such imports are now banned.

 

INVESTMENT IN AND GROWTH OF THE AUTOMOTIVE PARTS SECTOR IN THE XUAR

To take advantage of the consolidation and expansion of key materials processing in the XUAR, central, regional, and local government agencies have invested significant resources in developing the automotive manufacturing in the last decade. In 2014, the Economic and Information Commission of the XUAR announced that the Uyghur Region would “build Xinjiang into an important automobile manufacturing and westward export base” that would take advantage of the region’s location as a transportation hub and its “advanced logistics.” The government kicked off this initiative with the 2014 “Auto Parts and Agricultural Machinery Industry Matchmaking Conference,” which was hosted to share incentives and develop partnerships with automotive companies.[9] The “Made in China 2025 Xinjiang Action Plan” disseminated in 2015 repeatedly mentions the government’s very specific ambitions to expand the automotive industry in the region and to make XUAR-based automotive parts brands into national and internationally recognized brands.[10]

Local and regional governments of the Uyghur Region have worked to create a business-friendly environment to make the remote region more attractive for business and manufacturing. Region-wide incentives such as free rent, subsidized utilities, employee training subsidies, and coercive labor transfers of disciplined Indigenous workers have characterized the constellation of programs offered to Chinese companies to encourage (perhaps even compel) them to move their manufacturing to the Uyghur Region.[11] In March of 2022, the capitol city of Ürümchi announced 87 measures to further “optimize the business environment” in the city, which included “protecting the legitimate rights and interests of enterprises,” “preventing excessive interference,” making the licensing and approval processes speedier, creating differentiated regulatory environments based on corporate social credit scores, reducing the customs documents necessary for import and export, providing 1% interest financing to companies, and generally reducing restrictions on corporate development in the region.[12] It is clear that the expansion of manufacturing in the Uyghur Region continues apace, despite setbacks due to domestic economic challenges, human rights crises, and COVID.

In the second half of this report, we discuss the exceedingly high risk of Uyghur forced labor involved in the manufacture of car parts. One chapter examines both ICE and EV batteries. In another chapter, we analyze the way in which automotive electronics that are sourced from other regions of China are also exposed to forced labor of workers from the Uyghur Region, as electronics manufacturers have been actively engaged in cross-regional state-sponsored forced labor transfers. Finally, we discuss interiors and tires that are made by people subjected to state-sponsored labor transfers in the Uyghur Region. Online Annex A includes a comprehensive list of all auto parts manufacturers we identified operating in the Uyghur Region, even if there is only scant information about them online, as it may be useful for corporate supply chain tracing. 

In sum, our findings suggest that practically all parts of the car are exposed to Uyghur forced labor in one way or another.

ANTICIPATED EXPANSION

Auto parts manufacturing is now underway in Hotan,[13] Korla,[14] Manas County,[15] Khorghos,[16] and Ürümchi.[17] The automotive part manufacturing industry will continue to expand in the Uyghur Region, as increased subsidies and new facility development project announcements attest.

In February of 2022, a CNY 260 million auto parts manufacturing project with an annual sales projection of CNY 1.6 trillion, was proposed for the Sanji (Ch: Changji) region in the Zhundong Development Zone,[18] 160 kilometers outside of Ürümchi, where the project would take advantage of the proximity of aluminum, scrap steel, and molten iron (and almost certainly the low-cost coal that the region is famous for).

In May of 2022, the Administrative Committee of the Ürümchi government released a new directive on accelerating the further promotion of and increasing investment in the automotive sector in the Toutunhe Economic and Technological Development Zone, where much of the region’s car manufacturing takes place (see section on Toutunhe in this chapter). For companies that moved into the Zone and promised to remain for ten years, the district government committed to provide up to CNY 5 million in fixed assets subsidies, free rent on manufacturing workshops for three years and 50% market rate for two years thereafter, and special preferential procurement deals with government agencies. Furthermore, the government developed a special auto industry development sub-fund to “support investment promotion, traditional technological transformation, major technological breakthroughs, industrial platform construction, supporting system and corporate brand building, and new product development.” Executives of companies that develop in the Toutunhe Zone qualified for talent rewards and subsidies as well.[19]

In the spring of 2022, government representatives from the border adjacent Khorghos region of the XUAR traveled to several cities across China to develop relationships with enterprises to encourage investment through promoting the significant subsidies and incentives programs in place to attract business to the region. On that trip, a representative of Shaanxi Automobile Holding Group celebrated the company’s use of Khorghos as an export hub and indicated that the company is interested in engaging in an auto parts assembly project there in the future.[20] Facilitation of exports is a critical aspect of ensuring the success of automotive part manufacturing in the remote Uyghur Region, and efforts have begun to provide companies assurances that the XUAR will be a conducive place to do business on that front as well.

EXPORTS TO GLOBAL MARKETS

China’s domestic automobile consumption is steadily increasing – both for traditional and electric vehicles – and, thus, it is certain that some of the expansion of the auto parts industry in the XUAR is meant to support that growth. EV vehicle purchases are predicted to account for 20% of car purchases in the Uyghur Region by 2025, and the regional government is mandated to make 50% of their vehicle purchases be EVs.[21] This will certainly create significant demand for the automotive parts manufactured in the region.

However, the parts manufactured in the Uyghur Region are also being exported internationally, exposing the entire global automotive market to Uyghur forced labor. In 2022, car parts are one of China’s top exports passing through the Uyghur Region’s land borders by train into Central Asia and on to Europe and Russia.[22] These import/export corridors enable raw materials to enter for processing, processed materials to exit for fabrication, and fabricated materials to be exported to Europe, with connections to the Uyghur Region obscured in the process.

According to U.N. Comtrade data, in 2021, more than US $30 billion worth of auto parts were shipped from China to the United States ($11.5b), Japan ($3.6b), Mexico ($2.9b), Germany ($2.4b), South Korea ($2b), Thailand ($1.6b), Russia ($1.4b), Canada ($1.2b), India ($1b), the United Kingdom ($1b), and other countries. Given the deliberate investment the PRC has made in moving a significant part of the automotive industry to the Uyghur Region, this suggests that there is extraordinarily high risk of XUAR-made products being exported to automotive manufacturers worldwide. The following chapters provide insight into the significant exposure of the industry to products made in the Uyghur Region. It is critical that the automotive industry begin to reckon with the extent to which the industry is at legal, financial, and reputational risk, as the industries most central to the sector continue to expand in the Uyghur Region, at the same time as the PRC’s systematic program of forced labor expands.