In recent years, the contradiction between the limited nature of resources and the unlimited pursuit of large-scale operations by automakers has become increasingly prominent. Under such circumstances, some vehicle companies use limited resources to restructure in order to obtain super-large-scale benefits. At the same time, they adjust procurement rules in order to fully and effectively use global spare parts resources and occupy the fierce market competition. Advantage. How will this change affect Chinese auto parts industry?
Weng Yunzhong, executive deputy general manager of the Parts Business Department of Dongfeng Motor Co., Ltd., said: "China's auto parts industry has been forced to move from behind the scenes to the front desk and has become a key factor that restricts or promotes the development of China's auto industry."
Reorganization of vehicle companies puts pressure on parts and components industry
Multinational auto companies rely on their strong technical strength, capital strength, market expansion capability, and advanced management methods to establish joint ventures with China's auto companies one after another, rapidly shifting from technological output to capital and management output. At present, almost all well-known multinational car companies have a bridgehead to enter the Chinese automotive market. As a result, the competition in the Chinese auto market has become increasingly fierce. Weng Yunzhong said: "In this way, China's spare parts industry, which has always lagged behind the entire vehicle industry and hopes to obtain rolling development through digestion and absorption of imported technology, has been pushed to the forefront of facing international competition."
The important intention of auto companies actively participating in the reorganization is to increase the competitiveness of vehicle companies in brand management, global procurement, rapid assembly, global sales, etc., so that their internal parts and components companies become independent parts companies to market . For example, FAW Group established Fuao Auto Parts Company, and Dongfeng Corporation established the Components Business Unit. This is the inevitable result of the reorganization of vehicle companies.
In order to survive and thrive in the fierce market competition, those multinational auto companies invariably launch new products quickly in China, and some even transfer new products that have just been put on the market internationally to China. Weng Yunzhong believes: "The acceleration of the upgrading of vehicle products has brought unprecedented pressure to Chinese auto parts companies."
International reorganization of domestic vehicle companies brings new procurement rules
The reorganization between vehicle companies led to the adjustment of auto parts procurement rules. Weng Yunzhong said: “Parts with the best quality, the most advanced technology, and the best service with the least capital have become the best ideas and rules that global procurement follows, and will also become the new rules for Chinese auto parts companies to purchase parts and components. ."
The implementation of the new procurement rules will definitely break the umbrella provided by domestic vehicle companies and some local governments to parts and components companies; the domestic parts and components companies will lose quality in terms of quality, technology, services and costs in the absence of protective umbrellas and international parts and components companies. All aspects of fair competition.
The adjustment of procurement rules will inevitably promote the transformation of domestic auto parts supply systems to pagoda-style structures. The so-called pagoda-type supply system refers to the first-tier to third-tier suppliers: the first-tier suppliers provide the complete vehicle companies with power, chassis, bodywork and interior four complete system assemblies; the second-tier suppliers are the first The supplier supplies the parts and parts; the third supplier supplies the parts to the second supplier.
Each component company must find its position in the pagoda-type supply system with its comprehensive strength. Otherwise, it will be self-contained.
Weng Yunzhong said: “How to reduce costs in terms of technology, materials, human capital, lean production, and management is a new issue that global procurement raises for Chinese auto parts companies.â€
The Main Problems Existing in China's Auto Parts Enterprises
"At present, there are four major problems in China's auto parts enterprises." To sum up, Weng Yunzhong specifically addressed these four major issues.
China's auto parts companies are small in scale and far from achieving economies of scale. In terms of market share, the market concentration index of China's auto parts industry is only 7.5%, while the market concentration index of the auto parts industry in the United States and Japan is as high as 58.4% and 53.4%, respectively. Weng Yunzhong said: “A large number of low-level and small-scale redundant construction have caused great waste of resources for the Chinese auto parts industry, and it is also the fundamental reason for the overall poor efficiency of Chinese auto parts industry and slow technical upgrading. This is China’s auto industry. The first big problem in the parts industry."
The investment ratio of auto parts industry in Japan and Europe and the United States generally exceeds 1:1, sometimes even exceeds 3:1. The annual development cost of some parts and components companies in Europe and America accounts for about 5% of the annual sales revenue. The annual development costs of some parts and components companies in Japan account for 6% of the total sales revenue. During the “6th Five-Year Planâ€, “July 5th†and “Eighth Five-Year Plan†period, China’s investment in the spare parts industry and the total investment in the auto industry were 35.8%, 33%, and 29.4%, respectively. This is a concrete manifestation of China's long-term restructuring of light vehicle parts. Weng Yunzhong said: "Block division and group separatism have caused the country's limited investment in the parts and components industry to be decomposed by severe small-scale redundant construction. This is the reason behind China's auto parts industry lagging behind the entire vehicle industry and constraining the entire vehicle industry. The important reason is that this is the second big issue for the Chinese auto parts industry."
The overwhelming majority of China's parts and components enterprises have inactive mechanisms and low organizational effectiveness. Basically, manufacturers are in a state of disorderly competition. At the same time, China's auto parts industry is still a labor-intensive industry. Although China has abundant cheap labor resources, its low management level offsets the low cost of labor in China. At present, the labor productivity of China's auto parts companies is only one-eighth that of Japan's parts companies. In addition, no matter whether it is the purchase of raw materials, the process control of work in progress, or the sales, distribution, and service of finished products, Chinese auto parts companies have not yet formed a large-scale cost advantage; in addition to the unreasonable product structure, many parts and components companies There is a serious excess of production capacity, a large number of assets are idle, and fixed costs increase. Or because new product development cannot be developed, or because the development of new products is restricted by capital and technology, China's auto parts companies cannot form mass production capacity. Weng Yunzhong said: "Low productivity and high product costs are the third major issue for China's auto parts industry."
China's spare parts industry has a weak foundation. In the process of China's auto parts industry moving from the original truck spare parts industry to the auto parts industry, most parts and components companies rely on loans from the State Bank for their development. The investment costs are high and the interest burden is heavy. At present, the asset-liability ratio of many companies in China's auto parts industry is 70% to 90%, and state-owned and old enterprises are still bearing a heavy social burden. Therefore, it is not easy for China's auto parts companies to maintain dire business. It is even more difficult to cope with international competition. Weng Yunzhong believes that "China's auto parts industry has not yet formed the ability to participate in international competition. This is the fourth major issue for China's auto parts industry."
How will China's auto parts industry stand from behind the scenes to the front desk?
The above situation tells people: China's auto parts enterprises are under tremendous pressure and difficulties and are forced to move from behind the scenes to the front desk. Since this is the case, how will Chinese auto parts companies stand in the coming years?
Weng Yunzhong said: "To answer this question, we must first understand the basic advantages that China's auto parts industry has."
He cited the main basic advantages of China's auto parts industry:
China's entire vehicle and parts industry already possesses considerable overall strength, industry scale and a relatively complete product line.
The structure of the auto industry tends to be reasonable and the degree of production concentration has increased. At present, the sales revenue of the top 50 parts and components companies accounts for more than 50% of the total sales revenue of the parts and components industry.
The backwardness of China's auto parts industry is changing. Parts of labor and raw material-intensive components such as water tanks and wheels have been exported.
The huge market in China can provide a sufficient amount of competition for a considerable number of parts and components companies.
According to relevant statistics, the income of employees in the vehicle and parts industry in China is approximately US$1 to US$2 per hour, which is equivalent to only 1/20 to 1/10 of the labor cost in the developed countries. If the quality factor of labor is taken into consideration, then China’s labor force has a greater advantage in comprehensive competitiveness. In particular, there are a number of engineering and technical personnel in China. Although their technical capabilities are relatively strong, their wage income is only one-tenth of the salaries of technicians in developed countries.
China's overall manufacturing capacity has been strengthened. In China, the annual output of automobile-related industries such as steel, machinery, and textile materials ranks among the top in the world. China's high-processing manufacturing industry will enter the growth stage. In the global division of labor system, processing and assembly manufacturing industries with certain technological content and added value will gradually shift to China. This trend will bring greater advantages to China's auto parts production.
The characteristics of China’s economic opening are becoming more and more significant and will attract more foreign capital.
Weng Yunzhong said: "Chinese auto parts companies should make good use of these advantages, comply with the development trend of the international parts and components industry, and realize 'five changes' as soon as possible."
The specific contents of the "five changes" are as follows:
Accelerate the integration of internal resources and realize the specialization of parts and components companies. For example, the parts and components division of Dongfeng Motor Co., Ltd. has reorganized in recent years according to the concept of specialization and systematization, and established a group of specialized system companies with reasonable division of labor, striving to build 3 to 3 to 5 years. 5 professional companies with considerable scale.
With the restructuring of the entire vehicle company and the adjustment of procurement rules, the parts and components companies are inseparable from the scale of operations in terms of quality and service improvement, and advancement in technology and price. Therefore, achieving scale is the only way for the future development of parts and components companies.
Adjustment of procurement rules, separation of entire vehicle companies and parts and components companies, and requirement for parts and components companies to change the status quo of long-term reliance on vehicle companies, expand externally, and achieve neutralization.
Component companies must seek a core position at all levels of the new pagoda-type supply system in the automotive industry. The core of parts and components companies includes product cores, development cores, and cores in the supply system.
The reorganization between vehicle companies brought new technical standards, access conditions and game rules, leading to the international competition among domestic auto parts companies.
Weng Yunzhong said: “This requires domestic parts and components companies to establish strategic thinking, strengthen international cooperation, strive for technical support and management support, and integrate international technical resources and global procurement systems to create conditions for participating in international competition.†For example, Dongfeng Motor Co., Ltd. From 2004 to 2007, the Components Business Unit will focus on improving the development capabilities and cost control capabilities in accordance with this concept, making full use of domestic and foreign advantageous resources, and actively participating in international competition in order to achieve a local and stronger, bigger overall: to achieve sales revenue From RMB 12 billion to RMB 13 billion, sales revenue in the external market of Dongfeng Group accounted for 30% of total sales revenue, sales revenue of passenger car parts and components accounted for 10% of total sales revenue, and operating profit margin was 7% to 8%.
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