Chinese auto parts manufacturers face new opportunities for development

Foreign-funded parts and components entering China do not always threaten local suppliers. Many multinational automotive companies prefer to directly collaborate with top low-cost Chinese part manufacturers, often providing guidance and training to help them improve their technical capabilities. This close partnership allows both sides to benefit from cost efficiency and quality improvement. Chinese auto parts manufacturers are now encountering new growth opportunities. Major international automakers, such as Ford, PSA Peugeot, and General Motors, have established procurement centers in China. Additionally, large suppliers like Delphi, Visteon, and Valeo have also set up offices here, increasing the number of quotation requests for local suppliers. In 2004, the import value of spare parts rose sharply from $3.4 billion in 2002 to $11.3 billion. However, this trend reversed in 2005. While car sales increased by 14%, the import value of spare parts dropped to $10.4 billion, while exports surged from $10.6 billion to $15.8 billion. These figures indicate that China’s spare parts industry is rapidly catching up with global standards. ASIMCO Chairman Jack Perkowski stated that the technological gap will be completely closed within the next four to five years. Since 1993, Chinese policy has allowed foreign firms to hold majority stakes in domestic auto parts companies. However, overseas suppliers were initially hesitant to transfer advanced technologies to China. Now, with the growing importance of the Chinese market, even high-tech companies are reconsidering their strategies. The intense competition in China’s auto industry has pushed most multinational automakers to realize that delaying local procurement could put them at a disadvantage in price wars. Importing parts from abroad can also affect after-sales services and customer satisfaction due to supply delays. As a result, many transnational automakers are focusing on sourcing parts from China. Interestingly, foreign parts companies sometimes find it difficult to compete with local Chinese suppliers. For example, manufacturing parts in the U.S. and exporting them to China can be more expensive than producing them locally. This makes it harder for foreign firms to maintain a competitive edge. ASIMCO, a well-known Chinese auto parts company, started as a secondary supplier to multinational automakers in 1997. Today, it supplies directly to companies like Ford. Although ASIMCO lacks deep technical expertise, its managers and workers understand the Chinese market better than foreign firms. By partnering with international companies, it can bridge the technology gap. Multinational companies value reliability and quality, not just low costs. They often choose to work directly with top Chinese suppliers, offering guidance when needed. As ASIMCO CEO Jack once said, “The best foreign companies entering China are working with companies like ours. Ten years ago, our advantage was capital; now, it's management and technology.” While Chinese suppliers still lag behind global leaders, they have more room to grow. However, challenges remain. In Europe, suppliers often control core technologies and provide detailed drawings to automakers. When multinational companies move production to China, original suppliers may resist sharing their intellectual property. This creates difficulties for new Chinese suppliers who may struggle to meet quality standards. For example, Ford previously sourced hubs from Germany. When a Chinese factory tried to produce them, the quality failed to meet expectations. As a result, multinational companies are cautious about choosing local suppliers, often starting with small projects and gradually expanding. To address these challenges, a proactive strategy is essential. Instead of waiting for big orders, Chinese suppliers should first build capabilities with smaller companies and gradually integrate into larger supply chains. Industry experts suggest that instead of waiting for multinational companies to come to them, Chinese firms should aim to become first-tier suppliers or maintenance parts providers. This approach can help them grow steadily over time. In summary, while challenges exist, the future looks promising for Chinese auto parts manufacturers. With the right strategies and partnerships, they can continue to develop and compete globally.

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