Local Automotive Supply Chain Change: The "Drop" of a Difficult Chess Game

Can local automotive supply chain enterprises usher in a new "era of great navigation"?

In the spring of 2022, an epidemic swept through Shanghai, bringing the former car town into silence, and the resulting car supply crisis is also spreading across the country. Today, the shutdown or production reduction of any parts and components company will transmit pressure to the relevant downstream enterprises across the country, which also makes Huawei Yu Chengdong issue a deafening voice - "If the resumption of work and production cannot be resumed, all technology or industrial industries involving the Shanghai supply chain will be completely stopped, especially the automobile industry."

Never before has the problem of the automotive supply chain been pushed to the forefront of the storm. Previously, as the automobile industry entered a new era, problems such as "lack of cores", "battery supply is in short supply" and "rising raw material prices" have surfaced one after another. And this is only an internal worry, looking at the world, the Russian-Ukrainian war, Sino-US trade war and other geopolitical influences can not be ignored. For the local supply chain, whether to continue to transform and expand or stick to the position, the next step is especially prudent.

01

The "fate" of globalization

"The development path of China's local industrial supply chain and parts companies is actually similar to that of the whole vehicle," wang Dazong, chairman of the Global Automotive Elite Organization, said of the development process of domestic supply chain enterprises.

In 1994, Wang Dazong, then the general manager and chief engineer of Delphi Energy and Engine Systems, a subsidiary of GM, returned to China and established three joint venture parts companies, and his biggest feeling at that time was that the starting point of domestic parts was very low, and it was not in line with the international standards, "even the most basic quality management system and research and development system."

Looking back now, the development of the domestic automotive supply chain system is no longer what it used to be. In this regard, Liu Xiaozhi, executive vice chairman of the Global Automotive Elite Organization and founder of AXLOON Automotive Technology (Shanghai) Co., Ltd., is also deeply impressed. From her point of view, the 70 years of development of China's automotive industry supply chain enterprises can be roughly summarized into the following four stages:

The first stage (1953-1980): the initial stage of China's automobile industry, a number of domestic parts factories and accessories factories have also grown with the development of the automobile industry;

The second stage (1981-2003): the comprehensive development of China's automobile industry, the introduction of advanced foreign technologies, including the establishment of Sino-foreign joint ventures, China's huge automobile supply chain gradually formed, but the technology is relatively backward;

The third stage (2003-2015): China's automobile industry is developing rapidly, but due to the late start, the technical threshold of fuel vehicles is high, and the technology chain is closed, China's automobile industry cannot change the situation of "passive follow-up and technology introduction";

The fourth stage (2015 so far): the automotive industry local supply chain enterprises are not strong but not strong situation has not undergone fundamental changes, but in the field of new energy vehicle supply chain gradually have a global competitiveness, China through the early policy layout, has established the world's most complete electrification supply chain, especially lithium batteries and key raw materials, thermal management, manufacturing equipment and other fields, has achieved overseas supply. China's electrification supply chain has active technological innovation, continuous strengthening of competitiveness, and a new pattern of industrial chain that is expected to achieve independent innovation in technology output.

Wang Dazong pointed out that although the development of local parts and components companies is similar to the path of the whole vehicle, the speed is lagging behind the whole vehicle. There are two reasons for this, one is that most enterprises are small in scale, the number of large enterprises is not large, and it is difficult to become bigger and stronger; the second is that the research and development strength and research and development investment of enterprises are still low, and the overall degree of internationalization is not strong, mainly relying on the internal circulation of domestic functions. Liu Xiaozhi also admitted that due to the late start and high technical threshold, enterprises tend to move towards a situation of large but not strong, complete but not excellent, in addition, raw materials, manufacturing equipment, product applications and other aspects also have considerable dependence on the outside world.

Previously, according to the 2021 Top 100 Global Auto Parts Suppliers List released by Automotive News, Bosch, Denso and ZF ranked in the top three. In China, only 8 local suppliers are on the list, namely Yanfeng, Beijing Hainachuan, CITIC Dicastal, Johnson Electric, Minshi Group, Wuling Industry, Anhui Zhongding Seals and Desay SV.

Bosch (Source Network)

However, if local companies want to truly achieve a level of competitiveness, internationalization is the only way. At present, there is no country that can be capable and self-sufficient in all aspects of the supply chain, as long as the pattern of mutual division of labor still exists, opportunities and opportunities can also emerge.

Liu Xiaozhi also believes that local excellent parts and components enterprises will eventually go global, "first of all, we must adhere to the idea of openness, can not be complacent; secondly, the process of internationalization is an all-round challenge to technology, capital, management, talent, many enterprises through the introduction, mergers and acquisitions, digestion, absorption and other ways to achieve the goal of independent development, but in the final analysis, it is still necessary to grasp their core competitiveness as soon as possible to improve their technical strength." ”

Considering the dual impact of the current tense international situation and the epidemic, Wang Dazong remains optimistic about this, "To let the bullets fly for a while, I believe that after the emotional stage has passed, the world will return to rationality, and countries will not really 'decouple'" He believes that the earlier trade-based globalization model will gradually become unsustainable, and the "internationalization 2.0" form will form a new driving force, "enterprises should consider building production bases directly to the market location, and enhance the awareness of providing services for OEMs, to create a truly stable and perfect industrial chain." He explained.

02

The course of the giant ship

From the perspective of the historical process of automobile development, every important breakthrough in automobile technology stems from the close cooperation between vehicle and parts companies. Generally speaking, the performance of vehicle companies in technology integration is indispensable, but the core technology and key components are mostly from parts companies.

Looking at The country, nearly 60% of German hidden champions have manufacturing plants in China, and the number of German companies in China has exceeded 2,000. In contrast, there are currently only 4 Chinese greenfield factories in Germany. In the world's top 100 auto parts, almost all enterprises in China have a deep industrial layout for many years. However, compared with these international parts and components enterprises, the internationalization of China's parts and components enterprises has just started, and there are only a few companies with excellent performance.

Among these enterprises, Fuyao Glass can be described as a leader. Since the internationalization process began in 2010, substantial progress was finally made in 2014 through investment in U.S. factories. So far, it has become the first in China and the second largest enterprise specializing in the production of automotive glass in the world.

Recalling the many years of serving as vice president and CEO of Fuyao Group, Liu Xiaozhi can be said to have witnessed the pioneering journey of Fuyao Glass. In her view, the success of Fuyao Glass is not accidental, and it is very instructive.

"First of all, it can achieve the ultimate focus, improve product competitiveness through continuous technological innovation, maintain high profitability, and create a product international brand; secondly, it can formulate an accurate internationalization strategy and market positioning and a clear action route, and it also has independent innovation capabilities in raw materials, equipment, and applications, and can be technically uncontrolled, which also benefits from having a strong team, as well as an excellent and stable cadre team."

In addition, Liu Xiaozhi also added that enterprises moving towards internationalization must understand and abide by the rules of internationalization, strive to enhance the credibility of enterprises in the international community, and have a clear corporate culture to create a new pattern of international industrial chain according to local conditions.

Talking about the turbulence experienced by enterprises in overseas mergers and acquisitions, Xia Jun, general manager of Zhejiang Yinlun Machinery Co., Ltd., is also one of the first-hand witnesses. As early as 2008, Mr. Xu Xiaomin, chairman of Yinlun Co., Ltd., put forward four internationalization strategies of "product internationalization, factory internationalization, talent internationalization and management internationalization" earlier in the industry. In order to accelerate the pace of international development strategy, realize the vision of providing efficient heat exchange solutions and becoming a world-class excellent supplier of advanced products, Yinlun began its international layout strategy overseas early, until May 2015, Yinlun intervened in the acquisition of American Thermal Power Company, and then successfully acquired and successfully completed the delivery on May 19, 2016, this overseas merger and acquisition road has gone for a full 8 years.

At that time, in the face of the fierce international competition pattern, Yinlun's internationalization strategy changed to a new route of "self-reliant development as the mainstay, supplemented by mergers and acquisitions". In Xia Jun's view, the ultimate goal of Silver Wheel is to achieve "global operation and localization manufacturing". "Although at the beginning, we also encountered problems such as inexperience, national cultural differences, and the non-replicability of management models, from the perspective of the challenges we face today, it proves the correctness and forward-looking nature of Yinlun's original prediction and strategic layout."

In the face of the turbulent international situation in 2022, Silver Wheel is also facing obstacles such as cost increases, supply chain security and carbon neutrality requirements, but due to early entry, stable foundation and deep layout, Silver Wheel also has a rock-solid foundation. According to Xia Jun, Silver Wheel has been unswervingly taking the road of localization manufacturing strategy and accelerating the implementation as much as possible - "there is no retreat, we must also go this way." In addition to the United States, Silver Wheel has established factories in Mexico, Europe and other places, and the process of internationalization has never stopped.

Nowadays, Silver Wheel has carried out in-depth layout at the three strategic development fulcrums of China, North America and Europe (Source official website)

This sensitivity to change is still engraved in the genes of silver wheels. "We are in a state of constant concern about the international situation, national policies, industry situations, and especially the markets we are involved in," Xia Jun concluded. In the organizational structure of Yinlun, there is a strategic planning department and an international marketing department to further enhance the accuracy of decision-making by absorbing multiple sources of information from front-line employees, consulting agencies and heavyweight customer communications.

At the same time, Yinlun also attaches great importance to the creation of talent echelons, "We must form a management team with international management capabilities and can adapt to Chinese culture." Xia Jun said that the construction of overseas talent teams can not be solved by just sending a few people to establish a research and development center, but to consider many factors behind it, that is, deepening the concept of "platform". "Once the internationalization strategy is set, will the technology platform be built by itself or through acquisitions?" What is your most critical advantage in someone else's turf? What is the most important point in time? Will it be too late? These issues are even more important for some companies that are now planning to go international, and they are things that require repeated consideration. If you are not completely sure, don't get involved easily. Xia Jun suggested.

03

Survival and the thought of talent

Compared with the excellent domestic enterprises that have gone overseas and taken root in the early years, most of the local automotive supply chain companies are still in the stage of exploration. Under the internal and external attacks of the epidemic, card neck technology and raw materials, "survival" has become a problem that must be faced, and the ability to resist pressure has become a criterion for considering the true strength of enterprises. The success of Fuyao and Silver Wheel is the result of the joint exploration efforts of several generations of talents in the early years, and in the face of this silver age full of new challenges, the company's efforts should start from the "root" and go "deep", and in the talent strategy, it is even more necessary to have a long-term vision and use flexible capital to resist the bumps in the road ahead.

Liu Xiaozhi proposed that local supply chain enterprises should be aware of the importance of scientific management in advance, "this is a problem that many enterprises will encounter, and no cash or improper investment is a very dangerous thing, which is partly to rely on early management and risk control awareness to avoid", and this will inevitably put forward higher requirements for managers.

As for the card neck technology that has been talked about and cannot be avoided by supply chain enterprises, Liu Xiaozhi believes that the reasons behind all this are related to people, "from basic research, raw materials, equipment, product manufacturing, product application, enterprise management and decision-making and other manufacturing industry chains need talents." Liu Xiaozhi's concern is not unreasonable: "If we continue to weigh weight and not weight, in the next three decades China will continue to achieve advanced manufacturing enterprises such as Siemens, Bosch and Denso." Chinese enterprises should build real strength, increase investment in research and development, accelerate technological innovation, and strengthen technical barriers, rather than relying on suicide price wars, nor cutting corners on products, but really establishing competitive strength. ”

Mr. Wang also called on enterprises to cultivate more talents in forward-looking functional research. "Many of today's supply chain talents only focus on the current products, and do not pay enough attention to the next generation, or even ten years later, and the capacity gap is relatively large." As far as it knows, among the Chinese engineers abroad, at least more than 40% of the enterprise personnel are engaged in forward-looking research and development, "if Chinese enterprises want to go out and become bigger and stronger, this short board must be made up." Mr. Wang Said, "On this basis, we can make up for other shortcomings in the internationalization process, and only then can we advance step by step." ”

On the other hand, international talent has also been given a new meaning in this challenging era. At present, what local supply chain enterprises urgently need is the "new talents" who can adapt to the so-called fourth stage of development - such talents not only understand China, but also understand the international, especially the needs of overseas customers, in addition to the demand for energy, international development, double carbonization and other new changes can be fully understood, which also achieves the legendary "composite talents". But at the end of the day, he needs to have solid overseas experience.

In order to attract more talents of this kind, Silver Wheel also has its own opinions, and it is more willing to face talents with an open mind. "First of all, the strategy of enterprise development must be enough to make people excited, not stay on paper; secondly, cultural tolerance, including the recognition of Chinese culture and the respect and respect for individuals," Xia Jun believes, "The arrogance and determination of Haina Baichuan will be able to achieve spiritual resonance with talents, and can also reach a synergy in the direction of the cause, which is the direction that enterprises can really implement.

epilogue

The bottom of the automobile power is the parts power. The foundation of a strong parts and components country lies in talents; the road to a strong parts country lies in the journey of sailing to the sea.

Wang Dazong is still looking forward to their bright future, "Although this road is more difficult, Chinese parts and components companies should still go out." I hope that in the future, there will be China's Delphi, China's Bosch, and Huawei in the automotive industry. ”

Behind this beautiful imagination is the strong demand of local supply chain enterprises for policies and capital to further converge and support. China's parts and components enterprises have reached a stage where they have to be valued, because there is no strong parts and components enterprises, let alone the ultimate goal of a strong vehicle country. Formulating industry standards, protecting the intellectual property rights of enterprises, incentive mechanisms, tax reduction measures... Encouragement at every step is crucial.

Wipe away all the dust, and settle down. This round, the decisive victory or defeat, more determination.