Xinhua News Agency, Beijing – June 4: The auto parts industry in China is being urged to seize domestic opportunities as major automakers continue to deepen their local supply chains. In a recent interview with Xinhua reporters, Dr. Beiting Lin, Chairman and CEO of DaimlerChrysler’s Northeast Asia region, emphasized the company's commitment to increasing local procurement. Over the next two years, DaimlerChrysler plans to significantly boost its purchase of Chinese-made auto parts, aiming for around $840 million in 2008—marking a substantial increase compared to previous years.
These locally sourced components will be used in the production of vehicles manufactured by DaimlerChrysler’s joint ventures in China, including both Mercedes-Benz and Chrysler models. The move reflects a broader trend among global automakers to align with China’s regulations on auto parts imports, particularly the "Regulations on the Administration of Imports of Auto Parts That Constitute the Characteristics of Complete Vehicles."
Dr. Lin’s comments signal not only DaimlerChrysler’s long-term strategy in China but also the acceleration of Beijing Benz’s localization efforts. As high-end global brands establish deeper roots in the Chinese market, the industry is witnessing a shift toward more integrated and technologically advanced production models.
The development of joint ventures in China has evolved from basic assembly to the production of mid-to-high-end vehicles. While this process has brought significant technological and capital upgrades, it has also been marked by complex negotiations and evolving interests between partners. In recent months, discussions have intensified on how to ensure that joint ventures remain mutually beneficial and sustainable.
Analysis of recent actions by major automakers like DaimlerChrysler and BMW suggests that China’s auto industry is moving away from the "Brazilian model" of pseudo-localization. With stricter regulations in place, such as the "Auto Parts Import and Export Management Measures," the era of low-quality, imported-based vehicles is fading. Instead, the demand for globally synchronized, high-tech vehicles is creating new opportunities for Chinese auto parts manufacturers.
However, challenges remain. Industry experts note that the most profitable parts companies in China are still largely foreign-owned. These firms often take direct control of local suppliers, forcing them to meet global standards while capturing the majority of profits. This has put pressure on domestic parts manufacturers, who struggle to keep up with the pace of innovation and quality demands.
A deeper look at the situation reveals that China’s auto parts industry still faces fundamental weaknesses, including a lack of scale, low technical capabilities, and fragmented operations. While setting up production lines for global-standard vehicles is challenging, achieving real localization of key components and maintaining consistent quality is even more difficult.
Dr. Lin pointed out that the high-end positioning of Mercedes-Benz limits its production volume, making it harder to rely on local suppliers. A similar issue was faced by BMW in the past, with one solution being to encourage suppliers to improve their quality and integrate into the global supply chain.
Currently, companies like Chery, FAW, SAIC, and Dongfeng are focusing on developing their own passenger vehicle brands. However, the competitiveness of these companies is closely tied to the strength of their supporting parts industry. Therefore, domestic parts manufacturers should take advantage of the growing demand from joint ventures, enhance their capabilities through strategic partnerships and R&D, and lay a solid foundation for the future growth of China’s automotive industry. (Word count: 537)
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