Special Report

November 27, 2014

The improved path of Chinese domestic auto parts suppliers

As the world’s largest car market, China’s auto parts enterprises for the global market are also full of attractions. We must see that similar to Chinese domestic auto enterprises, local parts companies also have a long way to go to become world-class suppliers. China’s domestic parts suppliers have price advantages and are good at manufacturing machinery parts; however, the ability of integrating electronics, components and systems is still lack of experience. How the local suppliers strengthen their technological competitiveness? How to narrow the technology gap with international suppliers? How to adjust the strategy to enter into the Chinese market by the international suppliers? The issues mentioned above were the popular topics that should be confronted by both domestic and international auto parts enterprises.

“China – focused” strategy of international suppliers

“Delphi has 3000 engineers in its R&D centers in China; the Chinese market is going to catch up with the speed, so as to quickly respond to the biggest market in the world.” Dr. Yang Xiaoming, President of Delphi China, believes that Delphi will have considerable progress in Chinese market as a multinational company, due to the fact that Delphi keeps up with the pace of development of the Chinese market and seize the best opportunity for shrinking domestic market.

Similar to Delphi, Valeo also upholds the idea of actively adapting to the local culture in China. “Do not merely try to sell Valeo’s products to Chinese customers, but let Valeo’s products adapted to the Chinese market.” Edouard de Pirey, President of Valeo China argued that promoting Chinese business should follow China’s local culture, but not forcedly put French culture into the Chinese market. “Facilitating business in China based on a foreign mode of thing will not be successful”.

This opinion was also supported by Jay K. Kunkel, President of Lear (Asia Pacific), he expressed that Lear has set up Asian headquarter and empowers rights to local leaders, in order to be able to react quickly to the Chinese market, and also focus on developing Chinese local talents.

“Antitrust” signifies that China’s auto industry is getting mature

Recently, “antitrust” has become a hot issue that draws great attention to the public. The distinguished guests also expressed their views on this issue. Edouard de Pirey held his perspective that regardless of in the Chinese market or foreign markets, parts enterprises must comply with the provisions of antitrust law, that is no doubt. Dr. Yang Xiaoming believed that Chinese government penalties against violators is an effective measure to protect the market in terms of healthy and orderly development, to create a fair competitive environment that are beneficial for both China’s domestic or foreign suppliers.

Jack Perkowski, President of JFP Holdings said that antitrust is a necessary stage in the process of getting mature by the Chinese automobile industry. “Antitrust can let the market get more transparent with more equitable development, so that people will be able to purchase affordable authentic in the 4S shops, it is the original intention of the Chinese government.” 

Challenges of local suppliers in China

Most multinational suppliers have years of experience on working with the world’s largest OEMs, after entered into China, they can quickly get incorporated into the Chinese market as part of its global R&D network. In contrast, China’s local suppliers have deficiencies, and this gap is difficult to offset. In the R&D capabilities, the lack of grasping the real core technology is the weakness of local suppliers.

As increasing numbers of local brands tend to choose multinational parts suppliers, which leave smaller and smaller market shares for domestic parts suppliers. Nonetheless, opportunities also exist. Jack Perkowski said, “Today, some of the multinational suppliers were once regional suppliers a few decades ago, but they achieved global distribution via mergers and acquisitions.” Chinese local suppliers should also learn from that.

-Published on pages#41, November-2014 edition of MOBILE WORLD Magazine

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