Helping manufacturers win the sourcing game in China

OEMs position themselves to compete in the emerging markets such as Central and South East Asia, for example: VW’s joint ventures with FAW (First Automotive Works) and SAIC (Shanghai Automotive Industry Corp.); GM’s partnership with SAIC and the launch of Buick and Chevrolet in Central Asia; and, Toyota’s production relocation of the Hilux truck from Japan to Thailand in 2005.

OEMs are designing and producing a “world car”- a vehicle based on a single platform that automakers will sell in multiple regions of the world, for example: Ford’s Mondeo/Contour/ Mystique share 70% of their components; GM’s European Epsilon platform to enter the North American market as a Chevrolet; and, VW’s Golf platform is the basis of Audi A3, Skoda Octavia and various other models.

The move to the global platform will reduce the variation of components and the overall number of supply contracts. The remaining contracts will benefit large, multinational suppliers with global footprint. Tier one suppliers will have to support OEMs worldwide and offer manufacturing, design and supply chain management on a global basis (e.g. through the OEMs’ supplier parks). Tier one suppliers will have to develop close relationships with foreign-based suppliers through acquisitions, alliances and partnerships or joint ventures.

With the growing importance of the North East Asian (NEA) Market, OEMs have started to realign their sourcing strategies respectively. This is relevant for all automotive players as development throughout segments will be quite diverse. In consequence, automotive industry is investing heavily into their regional presence in NEA and China. Nonetheless, not all areas and not all of the systems are being sourced alike, for example:

• In 2005, sales of the biggest 100 Chinese suppliers was €20.37 bn.

• This was in major parts made up out of 40 joint ventures with approx. €6.21 bn. and 13 Chinese private owned companies with €3.12 bn.

• There are about 5,000 automotive parts manufacturers listed in China, 1,200 are foreign-invested companies.

• Especially, suppliers in Shanghai and neighboured provinces Zhejinag, Shangdong and Jiangshu belong to the sales giants.

• By building-up R&D of OEMs in China, there will be more electrical and electronic parts be produced in China.

To win in sourcing in China, it will be vital for automotive firms to evaluate savings potentials on a regional or even city perspective while fully understanding the total cost perspective on a system-by-system view before down-selecting suppliers and parts. In order to optimise potentials, PA‘s unique approach addresses procurement and supply chain optimisation as well as technical improvements.

To maximise your market opportunities in China, please contact us now.