Under the financial crisis, the internal resistance of multinational companies’ auto parts purchases in China has decreased and their enthusiasm has increased.

"After the financial crisis, the task that the group gave to our department is that the cost of each car must be reduced by another 500 US dollars." A month ago, the buyer of a multinational vehicle company's China office received instructions from the US headquarters.

At around 9 a.m. on December 11th, the Sheraton Pudong Hotel was crowded with people. Chinese buyers from a number of multinational vehicle companies and parts and components companies gathered in Shanghai from all over the world and used one day to meet with Chinese suppliers.

According to Chen Wenkai, the CEO of Gasgoo.com, the title of the (Shanghai) Auto Parts Purchasing Matching Meeting (hereinafter referred to as the matching meeting) attracted a total of 81 purchasing giants from more than 20 major automobile market countries. Among them, the global "6+3" passenger vehicle group and the top five commercial vehicle groups are mostly present. The world's leading Tier 1 and Tier 2 parts suppliers, such as Bosch, PSA, Schaeffler, and German Continental Group, also attended the event.

Although affected by the financial crisis, a small portion of purchases by Chinese multinational purchasers has declined sharply, but most of them have increased purchases to China. Chen Wenkai believes that the reason for this is that, influenced by pressures to cut costs, multinational corporate headquarters are more enthusiasm for purchasing in China, and internal resistance is relatively reduced.

“Companies that come to China to purchase are mostly listed companies. To guarantee share prices, it is necessary to maintain profits, and profits are closely related to sales volume and profit margins,” said Chen Wenkai. The only way to maintain profits is on the premise of global sales decline. Raising profit margins, reducing staffing and reducing procurement costs are the most effective means of reducing costs and improving profitability. This is the main reason why the current boom in China's procurement is again set to occur at this stage.

As these new multinational procurement buyers are still looking for suppliers, from the perspective of the conventional procedures for international procurement, they generally experience: supplier search, supplier development (upgrade), small batch trial production, and large batch SOP (standard operation Four stages are required for the procedure, and it usually takes two years from the first phase of the supplier search to the final SOP phase. Therefore, industry insiders speculate that the new round of large-scale exports of Chinese parts will occur two years later.

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As early as five years ago, PSA Peugeot Citroën Group decided to establish the PSA PSA Peugeot Citroën Group's Purchasing China Representative Office (hereinafter referred to as “PSA Representative Office”) in order to promote the automotive components of PSA Peugeot Citroen Group in China and neighboring countries in Southeast Asia. The volume of purchases has increased year by year.

But before this, PSA representative office really realized the purchase in China is minimal, its main function still mainly concentrates on understanding the Chinese market price, and uses this price to press the domestic supplier's price. “PSA headquarters has clearly sought out suppliers in China,” informed sources said, matching PSA is to bring a specific project.

PSA China's procurement began to be real and the main background was affected by the global economic crisis. In order to minimize the impact of the future, French companies are also trying to deal with the economic downturn. Prior to this, Fiat CEO Sergio Marchionne said, "Fiat needs to seek another car partner to ensure that the company can respond to the crisis at the time, and revealed that the leaders of both Fiat and Peugeot Citroen have already discussed this."

The increase in risk awareness is the main driving force for companies to increase cross-border purchases, especially in North America. The reporter learned that not too long ago, two of them had reached a tacit understanding of meeting with Chinese suppliers in order to reduce procurement costs through joint procurement. Some of the first-tier and second-tier component suppliers that are supporting foreign automakers, in addition to purchasing components from third-tier suppliers, also purchase equipment from China. Prior to that, China's spare parts companies usually imported equipment from abroad.

At the same time, the world’s leading commercial vehicle companies have also invested in the sights of multinational procurement in China. The reporter learned from the “2008 Shanghai International Auto Parts, Maintenance Testing and Diagnostic Equipment and Service Articles Exhibition” that they came to the exhibition. Parts suppliers, a large part of which are the first and second-tier suppliers of international commercial vehicle companies.

Chen Wenkai also revealed that the proportion of commercial vehicle companies and first- and second-tier parts and components suppliers that have come to participate in the “matching event” for commercial vehicles has increased significantly. The main reason is that with the improvement of China's commercial vehicle market and the increase in production, China has been promoted to become the world's largest commercial vehicle market. This provides a good procurement environment for commercial vehicle companies in China; and second, although Commercial vehicle companies are not as competitive as the passenger vehicle market. However, with the advent of the global economic crisis, global companies are raising awareness of the crisis and reducing costs. This has become a new topic for all companies including commercial vehicle companies.

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Ready at all the time

Since the global financial crisis, domestic parts and components companies have also faced great challenges. The majority of companies have significantly reduced the number of orders, and some companies have experienced frequent cash flow. An Yuhuan parts supplier who asked not to be named revealed that in Yuhuan, an area where automobile parts and components are an important industry, most export companies have faced serious reductions in orders since last year. Some smaller factories have even Has been overwhelmed, facing the risk of closure.

Zhang Jinmu, executive vice president of the Rui'an Automobile and Motorcycle Parts Industry Association, said that at present, the overseas orders of small auto parts companies are almost gone and they can only be maintained by the domestic market.

Senior Automobile Market Analyst Zhong Shi believes that "before China's spare parts companies were too much, perhaps through this round of survival of the fittest, it will make the strong stronger and form a group of powerful suppliers."

Chen Wenkai also revealed that the leading companies that are 4% to 5% of the parts and components companies are planning to expand production or mergers and acquisitions. The reporter learned from the leading companies in a number of component market segments that some of them have made preparations for the future market through expansion or mergers and acquisitions, and some have formed alliances through strong alliances to jointly develop larger markets.

At the end of 2007, Wanchao Chao (000559) publicly issued additional shares to expand the production capacity of drive shafts and automobile wheels to meet the demand for export orders. In March of this year, as a Tier 1 supplier, Bosch acquired Shenzhen Kinder Instruments. This is Bosch's important acquisition in the automotive diagnostic equipment business following the acquisition of Bisbatt equipment in July last year.

With the completion of the acquisition, Bosch has expanded its automotive diagnostic equipment business to different levels of high, medium, and low, and has thus become the largest supplier of automotive diagnostic equipment business. On December 10, Zheng Dazhi, general manager of Bosch Trading (Shanghai) Co., Ltd. revealed that he hopes to increase the market share of its automotive diagnostic equipment business from 8% to 10%. From 2008 to 2010, Bosch plans to reinvest 850 million yuan. EUR.

On September 18 this year, three German companies that are wholly-owned in China: American Automobile Import Corporation, Shanghai Mercedes-Benz Vehicle Technology Co., Ltd., Rheinland Technology (Shanghai) Co., Ltd., and an American company: Weiss Fuchs Environmental Testing Instruments ( Taicang) Co., Ltd. signed a cooperation contract with the four parties. It is agreed to jointly develop the market for the certification, testing, and issuance of certificates, etc., in China's entire vehicle, vehicle systems and components. Because before that, they have already seen the huge export potential of China's entire vehicle and component companies.

Food lovers

In fact, due to the financial crisis and the appreciation of the renminbi, domestic auto parts companies have severely blocked exports since the second half of the year. Finding new markets and new buyers has become a breakthrough for some export-oriented companies to resolve the crisis. Therefore, many companies will use the Matchmaking Club as the end of 2008 to win a "cup of cake" from this multi-billion-dollar purchase.

Prior to the hosting of the Shanghai Matchmaking Conference, in order to promote the transaction rate, the main office had previously rigorously screened and matched Chinese auto parts companies. The organizer has made professional comparisons and matchings with suppliers registered for the event based on the buyer’s detailed purchase requirements, and eliminated those companies that did not meet the requirements. On the spot, one-on-one negotiation models are used to allow suppliers and buyers to negotiate directly in order of implementation.

As a first-tier supplier of complete vehicle companies, Bosch has a large scale of procurement, and Bosch-owned companies also met with many buyers during the matching event. However, there are not many suppliers that satisfy Bosch buyers. Ford is also one of the major buyers of this matchmaking event. The reporter learned that there is still a gap between domestic companies in order to achieve the integration of procurement with multinational companies.

"Transnational procurement currently accounts for only the top part of China's spare parts procurement," Chen Wenkai believes that the export of Chinese parts and components companies is still far more than these cakes. However, over 70% of suppliers to foreign countries are internal transactions of international companies. For example, the branch company of Defufu is a universal support for the United States, and the proportion of local Chinese suppliers in this cake is far from enough.

The biggest problem with domestic parts and components companies is the lack of simultaneous development capabilities. At present, even if China's domestic supply is GM, Volkswagen and other enterprises supporting, quality can meet standards, but most of them still remain in the "Illustration-based" stage.

If foreign automakers are simply looking for cost savings and are looking for a long way to go, replacing local suppliers will likely run the risk of default. The principle of global procurement generally does not take mature products into Chinese production. Rather, it requires the simultaneous development of Chinese suppliers. However, domestic companies generally do not achieve the goal of dividing into more multinational procurement cakes. Component companies must upgrade their industries.

In addition, there is a problem of a single product market for domestic parts and components suppliers. The use of commercial vehicles will not develop passenger cars, and some parts and components purchasers will mainly focus on one or two customers, which may result in lack of competitiveness. In actual operations, Chinese companies often rely on merely low salaries, and their internal management capabilities are inferior to those of Japanese companies. These competitiveness are not strong enough.

In order to achieve industrial upgrading, he believes that Chinese companies should increase their profitability in the process of product sales to increase their profit margins in order to accumulate R&D funds. He also believes that the state can also promote policies to promote industrial upgrading.

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