The road of automobile OEM needs to be taken well and steadily| the voice of the China Automobile Association

The automotive OEM model is different from a few years ago. There are more and more cases in which enterprises cooperate with other enterprises to cooperate in research and development through the establishment of joint ventures or equity cooperation, or related enterprises participate in vehicle manufacturing at the same time, or enter the parts supply chain system. The opening up of related platforms by car companies has become an innovative development model.

Recently, it is reported that BYD chairman Wang Chuanfu and Weilai founder Li Bin exchanged ideas in jianghuai factory, and some netizens speculated whether BYD and WEIlai would cooperate to oem Weilai related products? There is no definitive word yet. However, the phenomenon of foundry is indeed more common in China, such as mobile phone oem, computer OEM and so on. The so-called foundry is the initial equipment manufacturer to produce, and then attached to the brand of other companies to sell. The automotive industry also has a foundry situation.

Types of OEM in the automotive industry

For the oem of the automotive industry, domestic and foreign countries have long appeared. According to the research in the "China New Energy Automobile Industry Development Report (2017)", it can be seen that foreign FOUNDRies are mainly divided into three situations:

The first is oem between subsidiaries of different brands within the group. This kind of FOUNDRY can solve the problem of insufficient capacity in some parts. For example, in 2012, due to insufficient production capacity at the Porsche plant in Stuttgart, Porsche began to move the Boxster model to the Volkswagen Osnabrück plant.

The second is cross-group foundry. For example, Suzuki entrusted GM to produce related models, Volkswagen entrusted Daimler and Chrysler to produce related models, and PSA commissioned Mitsubishi to produce SUV models. This oem model should fully consider the responsibility attribution of product quality, but it has certain advantages in improving technology and controlling costs.

The third is the oem of professional foundry enterprises. For example, magna oem, which everyone is familiar with, Mercedes-Benz G-Class, Jeep Grand Cherokee, BMW X3, BMW 5 Series and other well-known models are all produced by its FOUNDRy. This model can not only make up for the lack of production capacity of vehicle companies, but also save costs.

The way of automobile management in the mainland is different from that of Europe and the United States and other countries. European and American auto companies do not need to carry out corporate access, while the mainland adopts a dual access management method for automobile manufacturers and products.

The domestic automobile OEM model is mainly direct OEM between qualified enterprises and unqualified enterprises, that is, domestic traditional car companies and new forces enterprises. The most typical is Jachuai and Weilai. In May 2016, Jianghuai Automobile announced that it had signed a Manufacturing Cooperation Framework Agreement with WEILAI Automobile. NIO will authorize JAC To use its trademark and related technologies, while JAC Motors will be responsible for producing new energy vehicle models for NIO. At that time, when the Internet car-making enterprises were popular, but there was no real mass production, for the new car-making forces, their vehicle production and manufacturing technology capabilities are weak, so cooperation with traditional car companies is a "shortcut" to achieve mass production. At the same time, traditional car companies can also inject new vitality into themselves through OEM or deeper cooperation, which is something that both sides are happy to see.

There is also a consignment modification for commercial vehicles. This is mainly to standardize the loading and management of truck-type road motor vehicle products.

Industry access management guides the development of norms

Due to the management system of the automotive industry in the mainland, the oem of the automotive industry has relevant policy requirements, mainly including the national development and Reform Commission's production project management of automobile investment enterprises and the access and product access of automobile production enterprises under the supervision of the Ministry of Industry and Information Technology. In recent years, Internet technology, information and communication technology and traditional automobile manufacturing technology have been deeply integrated, and new production methods such as OEM production and authorized manufacturing have emerged. In order to adapt to the development of the new situation and promote industrial transformation and upgrading, in 2018, the Ministry of Industry and Information Technology issued Order No. 50 - "Measures for the Administration of Road Motor Vehicle Manufacturers and Product Access" (hereinafter referred to as the "Measures"). The "Measures" encourage road motor vehicle manufacturers to carry out research and development and production capacity cooperation, and allow road motor vehicle manufacturers that meet the specified conditions to entrust processing and production. Encourage road motor vehicle R&D and design enterprises to cooperate with production enterprises, and allow R&D and design enterprises that meet the prescribed conditions to borrow the production capacity of production enterprises to apply for road motor vehicle production enterprises and product access. This is also the first time that the Ministry of Industry and Information Technology has made it clear that it allows automobiles to be commissioned for processing and production.

Under the guidance of national policies, the new energy automobile industry in the mainland has developed rapidly. According to statistics, at that time, the number of investment and financing in the industry showed a rapid upward trend, there were some investment overheating phenomena, and dozens of new car-making forces appeared. In order to control the new production capacity and avoid blind investment and disorderly entry of new energy capital, the relevant industrial investment policies are also tightening.

In December 2018, the National Development and Reform Commission promulgated the Provisions on the Administration of Investment in the Automobile Industry (hereinafter referred to as the "Provisions"), which came into effect on 10 January 2019. The "Provisions" raise the access standards for investment projects. Strictly control the production capacity of new traditional fuel vehicles, clearly prohibit the scope of fuel vehicle investment projects that are prohibited, and strictly increase the access conditions for fuel vehicle production capacity investment projects. At the same time, we will further improve the conditions for investment projects of new pure electric vehicle enterprises, clarify the requirements for investment entities, technical levels, and project areas, and actively guide the healthy and orderly development of new energy vehicles. The release of the "Provisions" not only restricts the production capacity of qualified enterprises, but also a test for enterprises that have not obtained qualifications, especially enterprises with new car manufacturing forces, and it is very difficult for new car manufacturers to obtain qualifications.

However, the industry management department has also successively released the signal of orderly release of new energy vehicle OEM.

On May 25, 2020, at the second "Ministerial Channel" Q&A press conference of the Third Session of the 13th National People's Congress, Miao Wei, former Minister of Industry and Information Technology, answered reporters' questions on the future development of new energy vehicles. It is proposed that from the supply side, the Ministry of Industry and Information Technology will further increase the reform of "decentralization service" and orderly release the oem production of new energy vehicles.

On July 30, 2020, the Decision of the Ministry of Industry and Information Technology on Amendments (hereinafter referred to as the "Provisions on Access Management") was issued, deleting the requirement of "design and development capability" for applying for the admission of new energy vehicle manufacturers. This is also a big positive for foundry companies to produce new energy vehicles.

On June 18, 2021, the 11th China Automotive Forum was held in Shanghai. The relevant responsible comrades of the First Equipment Department of the Ministry of Industry and Information Technology attended the forum and delivered speeches. The first equipment department said that it is necessary to deepen the reform of "decentralization and management services" in the field of automobile production and orderly release of foundry production.

The development trend of FOUNDC Innovation

In 2021, the production and sales of mainland automobiles reached 26.082 million units and 26.275 million units, respectively, an increase of 3.4% and 3.8% year-on-year, respectively, ending the decline for three consecutive years since 2018, and the total production and sales of mainland automobiles have ranked first in the world for 13 consecutive years. The new energy vehicle market is showing explosive growth. In 2021, new energy vehicles sold 3.521 million units, up 157.5% year-on-year, accounting for 13.4% of total vehicle sales. Since 2015, the sales volume of new energy vehicles has occupied the position of the world's largest producer and sales country of new energy vehicles. The product quality and market recognition of new energy vehicles in mainland China have also been comprehensively improved.

The "second half" of the automobile industry transformation has begun to electric intelligence. In recent years, the mainland has promoted the coordinated development of automobile networking, intelligence and electrification, and is currently in the early stage of commercialization of rapid technological development and industrial acceleration layout. L2 class driver assistance functions have begun large-scale production, and in 2021, the market penetration rate of L2 class passenger cars will reach 20%. The cooperation between Internet companies, new car-making forces and vehicle companies has also become a trend.

It can be seen that the automobile industry is experiencing major changes unprecedented in a century, accelerated change, intensified competition, in-depth cross-border cooperation, diversified market development, etc. These new changes have never been experienced in the automobile industry before. In the face of the current new industrial development situation and the current situation of government management, it is not a try to carry out OEM work, which is conducive to the development of the industry.

In recent years, with the entry of major domestic car companies, the model of automobile OEM has also been different from that of a few years ago. In addition to the situation mentioned above, according to media reports, there are also new situations, such as enterprises through the establishment of joint ventures or equity cooperation with other enterprises to cooperate in research and development, or related enterprises to participate in the manufacture of complete vehicles at the same time, or into the parts supply chain system more and more cases. Car companies have opened their own related platforms to become an innovative development model, and more companies will join in the future. In this model, in addition to manufacturing work, vehicle companies will also provide engineering and technical support, and at the same time, they can continue to accumulate relevant application experience of intelligent technology and promote the transformation and upgrading of automobile intelligence, which is a good thing for both sides.

In short, the innovative development model should allow advanced enterprises to develop better, so that advantageous enterprises can make full use of and integrate existing production capacity to accelerate development, do better and stronger, so as to improve the overall capacity utilization rate of the industry, but in the development should also think about and pay attention to the following issues:

First, actively guide the orderly withdrawal of ineffective and backward production capacity.

Second, through industry practice, we will continuously optimize and improve the governance system such as product responsibility, production consistency, double integral and after-sales service management.

Third, the two sides of the foundry should cooperate under the premise of full consideration in research and development, production, technology, brand, channels and other aspects.

Fourth, under the premise of compliance, we will actively explore new models to promote the balance of production capacity within the vehicle enterprise group.

Of course, the specific innovation and development model of OEM should be gradually explored in the market, and the industry and enterprises continue to accumulate experience in this process. Only under the correct guidance of the competent authorities and the joint efforts of enterprises can the automotive industry continue to innovate and develop healthily and high-quality.

Note: This article was first published in the April 2022 issue of Automotive Magazine in the "Voice of the China Automobile Association", the author is Shang Jiao, deputy director of the Industry Development Department of the China Association of Automobile Manufacturers, and Zhang Junyi, director of the China Association of Automobile Manufacturers, so please pay attention.