China's auto parts position in the global supply chain
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Deputy Secretary-General of China Association of Automobile Manufacturers Shen Ningwu
Jan Borgonjon:
The following is about the Chinese auto parts industry, so I think the discussion of this unit is very closely related to the discussions in the previous several units. The Chinese auto parts industry is an important part of the Chinese auto industry, not only from With the development of technology and the matching of spare parts, in terms of cost advantages, Chinese parts and components are very important. Of course, from the perspective of the global automotive industry, global auto makers also have a keen interest in China's parts and components industry and hope to purchase more from China. Today there are three well-known spokespersons in this unit. First of all, let us introduce the first speaker of the day, Mr. Shen Ningwu. Mr. Shen Ningwu has worked in Dongfeng Group's different positions for many years. He once held important positions in Dongfeng Group's affiliated companies, including Dongfeng Group's joint ventures. At present, Mr. Shen Ningwu is deputy secretary general of China Automobile Industry Association. In the association, Mr. Shen Ningwu is specifically responsible for the parts and components business in the automotive industry. He is welcome to speak below.
Shen Ningwu:
good afternoon everyone. The topic of my speech today is "The status of China's auto parts and components in the global supply chain". It focuses on the development status of the parts and components industry and how to enhance competitiveness and discuss together. I talk about five aspects. My frontier puts forward some of the outstanding problems in China's spare parts industry that I have felt in recent years. For your reference, I don't necessarily have the answer. The second introduces the historical background and status quo of China's auto parts development. The third part of the export of components and parts companies to go overseas to make a study. The fourth eleventh five-year special plan for the China auto parts industry is outlined. Finally, talk about the status of China's auto parts in the global supply chain.
The first question considers several issues in the development of China's auto parts industry. With the rapid development of China's auto industry, the proportion of parts and components industry in the automotive manufacturing industry continues to increase, during the 11th five-year period will usher in the golden period of development. China must become a manufacturing center for parts and components in the world, and China should be able to see words such as global parts procurement bases everywhere. But I want to say, is this kind of expression exact? The second question, the outline of the 11th Five-Year Plan for Automobile Development put forward the goal of comprehensively improving the competitiveness of China's spare parts industry. This proposal is very timely and very important, but the forthcoming planning outline lacks the goal of enhancing competitiveness. Specific implementation measures will inevitably cause people to worry about. By the end of the Eleventh Five-Year Plan period, has China's auto parts industry's competitiveness in the international arena improved or has it further widened the gap? Whether it is a simple amount of growth or brings about a radical change in nature, leaving suspense behind. What are the main reasons for the low industrial competitiveness of the third problem? How to define the position of the government, the industry, and the company in the promotion of competitiveness and play their respective roles? Frankly speaking, the government does not have clear measures and responsibilities. Industry management appears to have become loose. Does it mean that the company will be the core of improving competitiveness in the future. The fourth issue is all about the weak ability of independent development of enterprises, the lack of core technologies, and the matching of key parts and components assemblies controlled by foreign parties. This is a key issue for China's spare parts industry to enhance its competitiveness. Faced with the large investment in China's spare parts and the tendency of mergers and acquisitions in the face of foreign and foreign companies, traditional ethnic parts and components enterprises are deeply at risk of marginalization. The debate over whether the market can switch back to technology has risen. The policy of restricting foreign mergers and acquisitions has also been introduced. What adjustments should we make to the use of foreign investment in the spare parts industry in the future? In the fifth issue, the large number of private enterprises has risen. Foreign and Sino-foreign joint ventures have continued to grow. How do we define China's spare parts industry? I remember that the Secretary of the National Development and Reform Commission (Chen Bin) made joking remarks at the Tianjin Forum. I can't figure out what the Chinese auto industry is. Now I can't figure out what China's parts industry is. Is it that the wholly foreign-owned parts and components companies registered in China are part of China's parts industry or are they excluded from the Chinese auto parts industry? Improving industrial competitiveness means improving the industrial competitiveness in a broad sense including foreign-funded enterprises or keeping them out of the narrow industrial competitiveness. Comprehensively enhance the competitiveness of the parts and components industry, and cut the competitiveness of the key.
The Historical Background and Status Quo of China's Parts Industry Development. China's auto parts companies started with agricultural machinery, started with parts, and started with trucks. This way of starting has determined that China’s parts and components have a long history of large numbers, small scales, and low overall technical levels, and have not yet been fundamentally improved. . The growth of China's auto parts, over-reliance on car rental, transitional dependence on OEMs, and dependence on local government protection characteristics have led to the disadvantages of corporate products being monolithic and lacking market competitiveness, and are still seen in some SOEs. The development of China’s auto parts and components has been driven by the construction of a Sino-foreign joint-venture sedan plant during the entire development process, benefiting from the first auto industry policy to protect the localization rate of cars, thanks to the ninth five-year plan period. After the country's support for increased investment in spare parts and components, after entering the WTO transition period, the effect of such a drive, protection, and support is weakening. With the gradual local transformation of SMEs, private-owned capital component plants have developed rapidly and are showing very prominent development potentials and competitive advantages.
This figure shows that China's parts and components industry is rising in the entire industry, from 5% to 5%, and now the output value of parts and components in the automotive industry has accounted for nearly 35%. This is the operating data of China's spare parts industry last year. I will explain here. The data I quoted below are all 4447 parts and components companies at the end of last year. This is the number that was listed above the statistical scale of the National Bureau of Statistics. It is not clear to me how many parts and components companies in China are. This is the overall situation of last year's operation.
The distribution of the entire parts and components companies, China's parts and components companies are mainly concentrated in Zhejiang, Jiangsu, Shanghai, Hubei, Shandong, Guangdong and Jilin. The output effects of parts and components companies in Shanghai and Zhejiang are relatively higher than those in other regions. Among the 4 447 large-scale enterprises in the statistical scope, the proportion of large-scale enterprises is less than 1%, and the proportion of large- and medium-sized enterprises is less than 15%. We ranked the first Wanxiang Group of top 100 parts and components companies in 2005 and the top 100 companies. The sales revenue was RMB 25,200 million, which is quite different from the tens of billions of US dollars of international parts giants. Only four of the total sales revenue exceeded RMB 10 billion, and only eight exceeded RMB 5 billion. In particular, I would like to say that the proportion of state-owned components in parts and components companies has now lost its dominance. The number of pure state-owned enterprises accounts for only 4% of the total, private companies have accounted for 42%, and the number of foreign companies and Sino-foreign joint ventures is Increasingly, it accounts for 10.5% of the total. If the state-owned capital accounts for 30% of the shares in Sino-foreign joint ventures, then the total capital of state-owned capital in statistical companies is only about 50 billion yuan, which means that it accounts for 14% of the total capital. Another outstanding benefit is that of foreign companies. The average output efficiency of Sino-foreign joint ventures is better than that of state-run enterprises and private enterprises. Foreign companies are 5.9%, Sino-foreign joint ventures are 8.5%, private companies are 5.4%, and state-owned enterprises are at a loss.
In the development of China's spare parts industry, the four types of enterprises are mainly the four types mentioned above, which depend on the host, rely on government assistance, or independently develop the market and foreign investment. Now how to describe the parts industry in China? The status quo of China's spare parts industry, it should be said that after so many years of development, China has basically formed a complete parts and components system for domestic cars, but the lack of major car assembly and key technologies. The general lack of independent research and development capabilities of enterprises. Entering China’s international parts giants, they are beginning to integrate their Chinese joint ventures. They are moving towards a monopoly target that includes technology development centers, human resources training, adjustments to the division of production and distribution, and the establishment of a national marketing system. The increase in export volume is very large, mainly in the initial stage of the value-added products and raw materials consumable products and after-sales products. The export market of the joint venture is relatively high, but it is still controlled by the foreign party. Affected by factors such as price cuts by OEMs and rising prices of raw materials, it should be said that the operating environment of many parts and components factories in China is increasingly severe. The low-cost advantages of China's spare parts are being impacted.
This is the proportion of R&D funds invested by China's spare parts industry over the past few years. Although it has now increased, the overall ratio is still far behind the international level. Last year, the R&D investment for our parts and components accounted for 2.5%, which should be said to be between 3% and 5% in the world, and some even as high as around 10%.
China's auto parts exports and China's overseas roads. Last year, the parts and components were exported to more than 8 billion yuan. In the first six months of this year, it has exceeded 50 billion yuan, and by September it has reached more than 70 billion yuan.
The characteristics of China's auto parts exports have been described in terms of added value and technical level. Exports have occupied a large proportion of auto tires, and China’s auto parts exports also account for a large proportion of aluminum wheels. The export market of parts and components has a wide distribution, but one feature is that the export of parts and components is concentrated in developed countries, and the export of whole vehicles is concentrated in the third world. This is a relatively obvious difference. The scale is very small and very scattered. In 2005, there were more than 10,000 exporters of spare parts, but there were few companies with a value of more than US$10 billion. China's domestic auto parts companies are seeking to expand overseas. Our well-known Weifang Diesel Engine Factory and Weifang Power have set up an R&D center for automotive technology development in Austria, employ local staff, and return to domestic production. In general, especially for China. The spare parts companies and local auto parts companies are still in a preliminary stage of water testing, and they still lack experience in terms of talent pool, economic strength, and international experience.
With the 11th Five-Year Plan for Parts and Components, with the rapid development of China's auto industry, the proportion of parts and components industry in the automotive industry is increasing. It should be said that the eleventh five-year period will usher in the golden period of parts and components development. Under the authorization of the National Development and Reform Commission, the China Association of Automobile Manufacturers developed a special development plan for the 11th Five-Year Auto Parts. The entire plan implements the requirements for comprehensively enhancing the competitiveness of the parts and components industry, and emphasizes the development direction of new energy, environmental protection, and electronics. It highlights four thematic plans for automotive powertrains, automotive electronics, automotive-related industrial needs and auto parts exports. We are now planning to initially determine the eleventh five-year production value target is to reach 1.3 trillion yuan in total auto parts output value by 2010, of which the OEM output value of 730 billion, exports to reach 50 billion US dollars.
The last question is the status of Chinese auto parts in the global supply chain. In a basic style, the status of Chinese parts and components in the global supply chain has been significantly improved, but this status is still very fragile. At present, the proportion of auto parts and components in the automobile value chain is not high in China. The reason for its low level is due to the low rate of localization and the low value-added factors of ancillary products. China has not yet formed a scientific management system for the industry's unified supply chain. The independent supply chain management systems of Japan, the United States, Europe, and South Korea, which are dominated by foreign capital, operate independently, and it is difficult to form the integration effect of Chinese parts and components companies. The export of spare parts should not be blindly optimistic. The situation of “a fast and three low†should draw our attention. The number has grown rapidly, but the technology content of products is low, the added value of exports is low, and the proportion of OEMs in the market is low. The international procurement of goods in China has become less of a storm, and it is difficult to rely on low-cost exports for long-term maintenance. How is global procurement? I have a definition. Global procurement is an international supplier to China to use China's cheap labor to find the cheapest product. However, this product must meet its quality requirements and meet its stable supply requirements. So it is not a very easy thing. The construction of parts and components for overseas parts in China should still be at an initial stage. From the perspective of global supply chain, we have not yet formed a truly competitive first-class supplier. So my personal opinion is that if China wants to become a manufacturing base and it must become a procurement center, all kinds of arguments should be cautious.
According to the above, according to the planning tasks of the 11th Five-Year Plan proposed by our country, we should still speak positively. We must comprehensively upgrade the competitiveness of China's auto parts industry and strengthen its position in the global supply chain. The 11th-Five-Year Plan has a position to fully enhance the competitiveness of the auto parts industry, and it should be said that it has set the direction for the development of auto parts in China. China's auto parts industry should gradually increase research investment, enhance independent innovation capabilities, foster independent brands, and form independent research and development and independent innovation capabilities as soon as possible. The adjustment of industrial structure should be placed in a prominent position. The state must lead the reorganization and merger of parts and components companies, and strive to emerge one or more companies with a scale of over 10 billion U.S. dollars or more during the five-year planning period, so as to increase their strength in international competition.
But this one is not very easy. The first place is only 25.2 billion yuan. He still has a big gap of 10 billion dollars. But when it comes to the end of the 11th five-year period, we have not had one or two parts and components companies with a production value of more than US$10 billion. How do we talk about our position in the international supply chain? In the process of realizing self-developed and independent brands for China's entire vehicles, it is imperative to actively promote the ability of parts and components enterprises to develop their own capabilities and to develop them in parallel with the group machine factories. Some people say that there is no independent development of a complete vehicle, and that there is no reason for independent development of parts and components. It should be said that there is a certain truth.
China's enterprises should be encouraged to expand overseas, enhance their international exchange and cooperation capabilities, create international experience talents, enhance their international image, and expand international competition. Foreign-funded enterprises in China must strengthen their sense of social responsibility operating in China. This is not necessarily appropriate for what I may mention, but I proposed today that we must strengthen our sense of social responsibility for operating in China and obtain a reasonable operating profit. While promoting our own development, we must drive the development of local enterprises and drive local economic growth. In the long run, they also need to maintain their own sustainable development. Under the new industry pattern, the main point of improving industrial competitiveness is that the government should not only introduce policies to support the development and restructuring of the internal enterprises, but also continue to open up and attract foreign investment. In addition to strengthening the management of foreign capital mergers and acquisitions, it is necessary to increase the use of foreign capital. At the same level, it is necessary to encourage the transfer of technology from foreign companies. The government must attach great importance to the future status of private enterprises in parts and components, provide support in taxation, finance, etc., and indeed improve their business environment. It is necessary to accelerate the reform of state-owned enterprises' mechanism and system and to reverse the state of inefficient state-owned enterprises as soon as possible.
Comrade Li Shufu talked about the country’s support for him. It is not a specific support. It is an honorary support. However, I think that the support on the honorary reputation is still not enough and it should be implemented. I said earlier, what is called China's parts and components industry, my point is to gradually form an internationalized China's parts and components industry in which multiple forms of corporate capital coexist in a variety of forms and where there is both competition and coordinated development. Our association and the National Bureau of Statistics released the top 100 companies for the second consecutive year. It was first released in 2004. We said that in order to take care of domestic companies, foreign-owned companies were excluded, but last year we both agreed that they must We have also included foreign-owned companies in the top 100 companies in our country. In China's auto parts industry, I think that with the improvement of competitiveness, it will strengthen the important irreplaceable position in the global supply chain.
This is the end of my speech today. Thank you.