The US automotive industry is understandably concerned about the competitive threat of low-cost cars and components from China. The United States already imports almost $4 billion a year in Chinese parts, and that figure grew by an average of 25 percent annually over the past three years.

That rapid increase has sent shivers through the US automotive supply industry, which employs 1.2 million people at 9,000 companies and produces about $250 billion in parts each year. China is at the top of the management agendas of most of these companies, mainly because it is a dangerous new rival whose $2-an-hour labor gives it a significant cost advantage. Some US suppliers are trying to defend themselves by rushing to partner with companies in China or outsourcing work there without fully understanding the long-term wisdom of such moves.

An overstated threat

Clearly, China's vast supply of low-wage workers gives its companies a big edge in labor-intensive manufacturing. However, the magnitude of China's threat appears to be overstated—particularly for the next few years. So far, Chinese parts account for less than 1 percent of the value of the components in US-made cars and light trucks. Imports from China are still small change compared...