A CEO explains how he cut his battery chain's reliance on China and plans to offset the latest tariffs
He was CEO of Batteries Plus, a retailer that imported around one-third of its inventory from China. The chain sells batteries that power cars and other electronics at about 740 mostly franchised locations across the US.
Trump's 25% tariff on certain Chinese goods, which escalated the US-China trade war, raised costs for Williams.
That's when Williams decided to make a long-term change: He started buying products from as many sources as possible other than China.
Seven years later, he told Business Insider that he's lowered the share of materials his company buys from China from 32% down to 4%.
As Trump's trade war continues in his second term, Williams said Batteries Plus' decreased reliance on products from China has prevented much of the scrambling that Trump's tariffs have caused at other companies this year.
Batteries Plus turned to the US, Malaysia, and Vietnam
While some companies and investors are fretting over Trump's latest August 1 deadline for hiking tariffs on imports from several countries, including China, Batteries Plus has a diversified supplier base that it said insulates it from some of these pressures.
"That has obviously, in hindsight, proven to be a huge benefit for us," Williams said.
Batteries Plus found factories in other countries to replace what it previously imported from China.
One challenge was finding equivalents produced outside China that were of the same quality, Williams said. Car batteries that the retailer produces under its own X2 brand, for instance, now come from Malaysia and Vietnam because Batteries Plus was able to find suppliers in those countries that matched what their China-based suppliers could make.
"You're very careful to ensure that, because quality is your reputation," Williams said.
Batteries Plus didn't rely on a single country to replace what it used to import from China. Of the 32% that came from China in 2018, about 12 percentage points now come from Vietnam, 8 from US sources, 5 from Malaysia, and the rest from a handful of other countries.
That distribution was deliberate, Williams said, so that the company could shift between suppliers in the future depending on which countries are hit by tariffs.
"My strategy was, I'm going to diversify with key partners so that I can press the brake or the accelerator on different countries as this thing moves," he said.
The 4% of Batteries Plus' supplies that still come from China use minerals that the company hasn't been able to find good sources for elsewhere, he said.
The supply chain strategy has not completely shielded Batteries Plus from tariffs. The Trump administration is targeting a longer list of countries with duties than it did seven years ago.
Earlier this month, for instance, Trump announced a trade deal with Vietnam that would subject imports from that country to a 20% tariff, up from the current 10%.
Still, source diversification has helped Batteries Plus avoid some of the biggest tariff hikes during Trump's second term. Tariffs on imports from China briefly rose to 145% this spring, dinging profit at companies from Dollar Tree to Cracker Barrel.
Williams said that Batteries Plus wants to pass less than half of the cost of new tariffs to customers — and, for some products, "none at all," he said.
Batteries Plus has also used other cost-cutting options to minimize price increases. The company has increased automation at its warehouses to increase efficiency and negotiated with suppliers to minimize the cost of tariffs, Williams said.
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