Automobile Group and Wuhan Share Parts Project Cooperation

Automobile Group and Wuhan Share Parts Project Cooperation


Recently, Dongfeng Visteon, which invested US$30 million, was established in Wuhan. The investment of 30 million U.S. dollars is not really a big project even in the field of parts and components, but this investment has still aroused widespread concern in the industry because of the two main investors, namely Yanfeng Visteon Shanghai Co., Ltd. Dongfeng Electronic Technology Corporation belongs to SAIC and Dongfeng.

For SAIC and Dongfeng Group, a joint venture between parts and components companies, Dongfeng Visteon will undoubtedly be the first official attempt to share parts and components. However, the sharing of such parts and components is not the first of the three major domestic groups. At the beginning of this year, Volkswagen Transmission (Shanghai) Co., Ltd., a joint venture between China FAW, SAIC, and the German Volkswagen, opened its doors.

Dongfeng Visteon Corporation is no doubt a step further than Volkswagen Automotive Transmission Company, because at least SAIC and FAW have a common “mass platform”. The establishment of VW Transmission Corporation should even be regarded as the integration of VW’s business in China. Dongfeng Visteon Corporation is a more pure part sharing strategy.

Market pressure

Let's take a look at the background of the establishment of these two component companies.

Before and after China's accession to the WTO, with the multinational auto giants landing in China, the share of the public in China has fallen from 53% of the highest peak to less than 40% at the end of 2002. Lowering costs and increasing competitiveness will become even more important for the public to maintain their market share. However, whether it is Polo or Bora, Audi or Passat, although the same belongs to Volkswagen's products, the localization of its transmission has always been completed in the respective supporting systems of FAW-Volkswagen and Shanghai-Volkswagen. Because the procurement costs of parts and components account for more than 60% of the operating costs of vehicle manufacturers, it is difficult for the two parts manufacturing companies to achieve economies of scale due to the decentralization of demand. As a result, parts manufacturing costs are relatively high, and vehicle prices are also high. . Among all the parts and components, because the gearbox is a high-tech component product, it is one of the most important parts of the car. The public intends to use this as a starting point to achieve the full integration of parts and components.

The Dongfeng Group, for more than a year, has in hand Nissan, Honda, and increased cooperation with PSA Citroen, plans to transform and establish a number of new production lines, production of new Cars, SUVs, trucks and other products. Such a large number of vehicle assembly lines requires the support of more and more highly demanding parts and components companies. However, in terms of the Dongfeng Group's original parts and components system, it is naturally difficult to meet this demand. This time, Dongfeng Visteon was established to bring SAIC's subsidiary, Yanfeng Visteon Shanghai, into the company. It is no doubt that SAIC Motor’s advantages in spare parts can be better utilized.

Globalization

The sharing of parts and components in the international automobile manufacturing industry is a common practice. Feng Fei, vice minister of the Industrial Economics Research Department of the Development Research Center of the State Council, believes that more and more models will share a single procurement platform. Its core is to improve the versatility of parts and components and share parts as much as possible. Feng Fei believes that the purpose of sharing is nothing more than this: First, the use of large-scale production of common parts and components, the amortization of the increasing number of models and the ever-shortening of the product life cycle resulting in high development costs. Second, as the major multinational corporations are facing the global market, the demand varies greatly from region to region. Through the common procurement platform for parts and components, “the visible part has changed, and the invisible parts are all the same”. An effective response to the diversified demands of the consumer market.

This sharing model of parts and components is also affecting the organizational structure of international parts and components companies. According to Feng Fei, parts and components companies that originally only attached to a single vehicle assembly company started to face multiple global As for the supply of enterprises, some of the non-core businesses originally deployed in vehicle assembly companies began to externalize, and a network-type organization emerged between the entire vehicle and parts and components companies. The new division of labor and collaboration model also in turn promotes the implementation of the host plant platform strategy to achieve component sharing as much as possible. Feng Fei said that precisely because of this, under the background of accelerating globalization of the automobile industry, within a national framework, it has become increasingly difficult to establish a complete and competitive automobile industry system.

The international sharing of such parts and components will gradually break the original supply system of parts and components with the entry of multinational companies. In the past two years, the world's major multinational companies have been competing with the three major groups, and more and more vehicle lines will be established. The sharing requirements of parts and components among international giant China's new projects will also be urgent. This will undoubtedly increase the possibility of the three major groups further building part-sharing networks.

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