According to the report of “Automotive News of the United Statesâ€, China’s self-owned brand cars are under tremendous pressure and are seeking advanced technology to break the board. This means that the giants of component suppliers are accelerating the export of technology to China, aiming to obtain more business from their own brands.
Independent Brand: More Suitable Technology Output Object
According to "Automotive News of the United States", China's independent brands are "stressful" in sales. In the previous September, the market share fell to 37.6%, further decreased by 2.5 percentage points, foreign brands rose to 62.4%; thus, the independent brands are eager to improve the quality of automotive products. Actively adopt advanced technology to fight for the market share that is eroded. From the perspective of multinational suppliers, this will bring higher growth expectations.
Similar to the German mainland and the United States, Lear and other large parts manufacturers, most of their income in China comes from joint ventures. However, these giant giants of manufacturers have expressed that more business will come from China's own brands in the future. Companies such as Chery, Geely and Great Wall are particularly eager to acquire advanced technologies, while Chinese domestic parts suppliers cannot meet their needs, especially in the latest safety systems or energy-saving driveline technology. Therefore, multinational component suppliers are increasing their investment in China to meet the increasing demand. For example, mainland companies will invest US$1 billion (about 6.11 billion yuan) in China in the next five years; Lear plans to add four factories in China by the end of 2016 and expand the existing five factories.
Technical Challenges: There is still significant upside for autonomous vehicles
Ralf Cramer, president and CEO of Continental China in this month’s Global Automotive Forum in Wuhan, said that Chinese domestic parts suppliers need to go beyond two major steps to catch up with multinational suppliers: The first step is to reach international The current level of suppliers, the second step is to reach the level of multinational suppliers. When compared with the experience of independent and foreign suppliers, it throws a startling word: "Our experience is 10 times theirs."
In Ke Fufu's view, self-owned car companies lack advanced safety system technologies. Taking the electronic stability control system ESC as an example, it is already standard on multinational brand cars, but self-owned brand cars are still only partially equipped vehicles. The status quo will change. It said: "Our customers have no reason not to use these new technologies. The demand for these systems in the future will be much higher than our production capacity."
It is predicted that China's own-brand car companies will not be able to deploy a 100% stable control system after 2020, which makes Chinese auto companies wishing to add more complicated safety systems to be a headache.
The electronic stability control system is the basis of a series of advanced technologies, such as Lane-keep Assist and Precrash Braking. Most technologies are mainly driven by software, and few local companies are involved in competition. Ke Fufu pointed out: "This requires resources and proprietary technology."
In order to develop software and electronics, Continental has 25,000 engineers worldwide, including 11,000 software engineers. Ke Fufu even quipped: "We can basically be regarded as a software company."
Lear predicts that the business of electronic systems will also increase significantly. The company is one of the few suppliers that can provide complete electrical architecture, covering everything from harnesses to chips. Lear Asia Pacific Operations Chairman Jay Kunkel said that this year Lear has set up a team in China to localize product development and production to meet local needs.
In line with the starting point of “market-for-technology,†the Chinese government requires foreign-owned automakers and local companies to form joint ventures in China, in part because of hope that local auto companies can acquire some proprietary technologies. However, the market share of self-owned brands has been declining, partly due to the inability of independent brands to obtain the latest technology, whether it is a joint venture from a local supplier or a multinational car company.
Kunkel said: "The (government) expectation of technology transfer has not been truly successful. For us, this is actually an opportunity. We need to spend more time focusing on China's own brands."
Local manufacturers' hard work and foreign investment in China
The Chinese government is tightening emissions regulations, which will lead to an even more complex situation in the auto market, bringing similar pressure on local brands and joint ventures of multinational car companies. However, the responsiveness of multinational car companies is more advantageous. Some Chinese parts manufacturers have gone global, such as Wanxiang Group’s acquisition of the assets of the bankruptcy hybrid luxury carmaker Fisco in February. However, China’s industry and government leaders still admit that local suppliers are not competitive and see this as a major obstacle to the establishment of truly world-class local brands.
Wang Ruixiang, president of the China Machinery Industry Federation, said: "China lacks innovation and we have a long way to go if we want to transform China into a locomotive for automobile development."
The success of multinational suppliers in China has also led them to become the key targets of anti-monopoly of the Chinese government. This year, the China Development and Reform Commission has investigated and interviewed almost all major multinational automotive companies and dozens of multinational suppliers. Most luxury brands and major brands in several major markets have reduced the price of spare parts for maintenance.
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