Auto market sudden domestic heat suppliers welcome "Little Yangchun"

After five months of production suspension, Du You Automotive Mold Co., Ltd., the chairman of Shanghai Duyou Plastic Molding Co., Ltd., finally started construction and obtained a lot of orders. This small company located in Xuhang Town, Jiading District, Shanghai, became one of the first beneficiaries of the recovery of the Chinese auto market.

In contrast, the days of international giants such as Delphi, Bosch, Honeywell, and Schaeffler are even harder.

Global business shrinks, so that Delphi had to sell its own chassis business and survive. The global performance of other companies also generally fell by more than 30%.

The opportunity for the rise of local auto parts makers appears to be coming. However, Chinese engineers of foreign-funded parts companies have warned that compared with the giants that monopolize the core technology and the upper reaches of the industrial chain, local suppliers are like meat on a cutting board and their strength is still quite weak.

What's even more unfavorable is that the Chinese market is thriving, and giants such as Delphi, Honeywell, and WABCO have developed a series of ambitious plans, which pose even greater threats to local component companies.

Sudden surprise

Compared with the end of 2008, Hu Zhizhi looks a lot easier.

The first meeting was at Gass Net’s matchmaking party. Hu Zhizhi wore a smart suit and lined up with suppliers from Shanghai, Ningbo and other places to wait for a chance to meet with the buyer. The anxious look surfaced from time to time – from 2008. Starting in August of this year, the company's injection molding business was completely shut down and there was no order in the past five months.

As a last resort, Hu Zhizhi played the idea of ​​plastic parts for home appliances, from the production of automotive interior parts to various plastic parts of home appliances. However, this means that most of the more than 6 million automobile molding equipment purchased previously will be scrapped.

While national manufacturers and parts suppliers are extremely pessimistic about 2009, they have become steeper. "To be honest, when we did this year's sales plan at the end of 2008, it was a little lower on the basis of last year. No one expected this situation to happen," said Li Xiangxiang, brand manager of Shanghai GM Chevrolet.

Hu Zhizhi was also surprised at this time. In March, Hu Zhengzhi only provided 19,000 plastic pieces for Beijing Hyundai Entertainment. Benefited from the popularity of Beijing Hyundai Motor Co. and Dongfeng Yueda Kia Motors, Shanghai Dayou Plastic Molding Co., Ltd. achieved sales of RMB 4 million in the first quarter, far exceeding Hu’s expectations.

However, Hu Zhizhi also clearly saw the root cause of the frustration in 2008: the customer structure is too single. Shi Wenkai, the president of Gasgoo.com, has the same understanding. “Actually, most auto parts companies in China are in the state of eating for the rest of the world. Once a crisis occurs, only the customer’s production stops, and the suppliers follow problems. Self-help."

Therefore, Hu Zhengzhi’s next step is to become a Tier 1 supplier to the steering wheel. The steel frame of the steering wheel, various plastic parts covered by the surface layer, and integral parts including electronic components such as function keys and airbags are no longer parts supplied in the form of incoming parts. In the event of a crisis, he can pass pressure on downstream secondary and tertiary suppliers and improve his ability to resist risks.

"Foreignization" is another survival weapon for Hu Zhizhi. He hired a head of production management from South Korea, and this Korean person played a large role when he was studying a car manufacturer in the background of Korean investment. “Our philosophy is very different from Koreans. It's often difficult for Chinese people to talk about cooperation, but Koreans will get it right away.” Hu Zhizhi also stated that many unclear customers think his company is A Korean company, which also helped him a bit.

Hard survival

Wu Chuanjuan, Purchasing Manager of Delphi (Shanghai) Power Propulsion Systems Co., Ltd., said that due to the dual monopoly between upstream steel mills and downstream auto manufacturers, China's domestic parts and components suppliers can basically only “give people bully”.

In fact, the pressure of auto parts companies is prevalent in the entire industry. Wu Chuanjuan’s colleague and engineering manager Zhang Liangsheng said: “Shanghai General Motors says that you are pushing down prices by 30%. What are our options?”

However, compared with the lower-level companies in the supplier system, Delphi can get a little room for cost reduction by pressing down the second- and third-tier suppliers, while the companies at the bottom can only use labor costs such as layoffs and salary reductions.

According to the statistics of the company, the market share of foreign auto parts suppliers in China’s car market is as high as 80%; the market share of auto electronics and engine parts reaches 90%; and high-pressure common rail, ABS, and engine Core technologies such as core components and automatic transmissions have been firmly controlled by companies such as Bosch and Delphi.

In fact, the attempt to transform the local parts business has not stopped, but there are few successful cases. In 2004, Wuxi Weifu chose a joint venture with Bosch to gain high-end technology and management experience. However, it turned out that Wuxi Weifu eventually became a supplier to Bosch and lost its dominant position in the domestic market.

According to Alix Partners, a global business information company, more than 40% of China's parts suppliers have faced liquidity issues since the financial crisis. In the next year to one and a half years, a considerable number of parts and components companies will face the risk of closure.

In April, the president of Honeywell Transportation Group, Bu Ai'an, arrived in Shanghai and requested higher requirements from the general manager of the turbocharged and automotive consumer goods segment. “Automobile consumer goods will increase by more than 50% in China this year.” Bu Ai'an Frankly, North American and European operations have seen a year-on-year decline, and it is necessary to increase China's business volume. WABCO has also increased its investment in order to gain more power in the commercial vehicle market.

In addition, GKN, BorgWarner and Johnson Controls have separately established new factories or established joint ventures in China to seize the market with aggressive expansion. All these will be new resistance to the development of local parts companies.

“The local parts and components business is very powerful, and it is not easy at this low starting point.” Hu Guoliang, chief engineer of Taimike (Shanghai) Automotive Systems Co., Ltd. suggested that local parts and components companies need to formulate a reasonable strategic plan. Become a direct partner of the vehicle manufacturer.

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