"There are too many foreign-funded parts and components companies, and we do not have an advantage in technology. The pressure of market competition is indeed very high." A few days ago, a general manager of a Chinese-owned parts and components company said in an interview with reporters.
“Foreign-funded enterprises have pushed local Chinese parts and components companies to the edge of the 'cliff',†said Shen Ningwu, deputy secretary-general of the China Association of Automobile Manufacturers, in an interview with reporters. “With the gradual entry of foreign capital and the increase in investment, China’s capital is zero. The survival environment of parts and components companies is getting worse and worse."
Chinese-owned parts and components companies tend to be “marginalizedâ€
In recent years, the number of foreign-owned and controlled enterprises in the auto parts industry has increased year by year. Relevant data show that there were 30 newly established foreign-funded parts and components companies in 2003; in 2004, 28 foreign-funded parts and components companies were newly established; in 2005, more than 90 foreign-funded parts and components companies were newly established, which was 3.2 times that of 2004. The agreement reached an investment of nearly 4 billion U.S. dollars.
Foreign-funded enterprises entered China and quickly occupied the market share of key components and parts, becoming a first-tier supplier directly supporting the OEM. According to incomplete statistics, foreign investment has accounted for more than 60% of the market share in China's spare parts market. In key parts and components, foreign investment even accounts for more than 90%. “From the point of view of the lack of high-tech technology products and first-class suppliers with strong management capabilities, there is indeed a tendency for Chinese-owned parts and components enterprises to “marginalizeâ€.†Mr. Chen Wenkai, a senior analyst in the automotive industry, told reporters, “If Chinese-owned parts and components companies cannot occupy a certain share in the OEM market and they cannot enter the mainstream market."
Where does the "marginalization" tendency come from?
In addition to certain restrictions on the joint venture of the engine industry, China's existing automobile industry policies have almost no restrictions on foreign-invested parts and components industries. China's cheap labor and vast space for industrial development have attracted many foreign investors.
Statistics show that at least 70% of the world’s top 100 parts suppliers are currently doing business in China. Delphi, Bosch, Visteon, Eaton and other foreign parts manufacturers have established joint ventures or wholly-owned enterprises in China. Foreign investment has occupied a large market share in the Chinese spare parts market, especially in the car parts market. Especially in the key components sector, foreign-funded enterprises have taken the lead in the market.
On the other hand, parts and components companies in Europe, America, Japan and South Korea have entered China with the vehicle companies, and they have tried to maintain the original supporting system, making it difficult for Chinese-owned parts and components manufacturers to enter the complete vehicle market. Foreign parties strictly control technology spillovers, making Chinese-owned parts and components enterprises' competition in technology, investment and market passive. A general manager of a Chinese-owned parts and components company said: "Not that we don't want to enter the OEM market. It's that the automaker doesn't care about us. We don't even have the opportunity to compete."
"Some drawbacks of China's parts companies cannot be ignored," said Chen Bingyan, a car expert at the China Association of Automobile Manufacturers. "Parts produced by China's parts companies are mostly labor-intensive products with low technological content and low added value, and the quality of some products." It is not too hard. In order to win a small market in a limited market space, depressing prices has become one of the main means for some Chinese parts companies to compete for the market."
The hazards that come with it
Relevant experts pointed out that with the excessive consumption of resources, the sharp increase in raw material prices, and the increase in labor costs, the resource advantages that support the rapid development of China's manufacturing industry are being lost, and the development pattern of high consumption has been difficult to sustain. Manufacturing industry will change its dependence on resources from the past to its dependence on technology, and it is the general trend to promote industrial upgrading.
Chen Bingyan said that if the technology of key components is firmly in the hands of foreign-funded enterprises, and Chinese-funded enterprises are "marginalized," then the auto brands are an "empty shelf." If Chinese companies do not master the core technology, they will not be able to take up market share and the return on investment will be low.
Chen Wenkai said that there are many connected transactions in the auto parts procurement chain, which must be managed by a “chain ownerâ€. If Chinese-funded parts and components enterprises cannot become first-tier suppliers and rely solely on low-price competition, they will easily fail in competition with foreign-invested parts and components companies because they also have certain advantages in terms of labor force and product prices.
Do not worry too much and respond positively
Talking about the tendency of Chinese-funded parts and components enterprises to be "marginalized," Shen Ningwu said that there is no need to worry too much about this; comprehensively enhancing competitiveness is the fundamental way out for Chinese-funded parts and components companies.
Is Chinese-owned parts and components companies developing international markets or developing domestic markets? Do you want to be a Tier 1 supplier or a Tier 2, Tier 3, or Tier 4 supplier? Is it entering the OEM market or entering the after-sales service market? Is it an independent and independent operation, or is it an asset reorganization of a large group? Shen Ningwu pointed out that the first thing a Chinese-funded parts and components company needs to do is to find a correct position.
Experts told the reporter that now the government encourages independent innovation strategically and has created a good environment for development. The relevant departments of the state must promote industrial restructuring and optimization in terms of policies, and give preferential policies to enterprises without violating WTO trade rules. This is also the voice of Chinese-funded parts and components enterprises.
Chen Wenkai added that Chinese-funded parts and components companies still occupy a considerable scale in terms of low-tech, labor-intensive, and scale-effective products. From the division of labor, the potential of the after-sales market is still very large. Therefore, in order for Chinese parts and components companies to gain market share, they must improve product quality and rely on their own advantages to continue to grow bigger and stronger.
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