Poor R&D Capability Worsening Living Conditions of China's Spare Parts Enterprises

Usually when we talk about the automobile industry, we are full of eye-catching advertising pictures of various new cars and famous cars. Few people will think of parts and components. However, we cannot deny the fact that no matter how perfect the vehicle design requires components, the better the performance of the car, the higher the quality of the parts companies. Faced with the diversified competitive landscape of the market since the accession to the WTO, where domestic parts and components companies have their way out is a matter of common concern to the industry. Recently, this reporter interviewed relevant experts from China Automobile Industry Association and China Automotive Technology and Research Center.

R&D ability restricts enterprise development
Due to the weak R&D capability of domestic companies, market share cannot be guaranteed. According to experts from the China Automotive Technology and Research Center, in the developed countries, the auto parts companies’ R&D capability has been ahead of vehicle companies. In a newly developed vehicle abroad, 70% of the intellectual property rights belong to auto parts enterprises. The research and development capabilities of domestic parts and components companies are generally weak. Many parts and components companies are required to obtain technical and even processing drawings from the main engine plant. Their status is similar to that of a complete vehicle factory. The energy is mainly used to meet the established requirements of the main engine plant. To achieve synchronous development with the vehicle.

In the past two years, due to the acceleration of the speed of the launch of new models, the supporting pressure of parts and components companies is very large, and it is a very good company to meet the matching requirements of these new models in time. In fact, some new models launched in China in the past two years, such as Polaris and Audi, are difficult to find in China. Older models, such as Jetta, have more than 200 suppliers in China, which is significantly higher than the new models.

R & D investment is too small
Perhaps due to inertia, it is very difficult for domestic companies to step out of the old frame of “car-driven parts and components”. Therefore, the investment of domestic parts and components companies is very limited compared with the entire vehicle industry.

According to the general statistics of foreign companies, the average investment in the parts and components industry should be 2 to 1.5 times that of the entire vehicle company, while the current situation in China is less than 0.3 times. Such small investment makes it difficult for enterprises to develop technology and products. There is a great deal of investment in development. According to statistics, the annual development investment of auto parts enterprises in China is generally about 1% to 4.5% of sales revenue, compared with 3% to 5% or even 10% in developed countries.

Profit from OEMs suppresses tough life for parts and components companies
In order to realize the maximization of the Group’s profits, the OEMs will reduce the OEM’s cost share in the competition of the entire vehicle market and directly transfer them to the parts and components companies. Parts companies are located between the upstream raw materials and the downstream host. Under the dual pressure of the cost of raw material price increase and the cost of the compression of the main plant, the company's benefits are generally worrying. In the actual procurement, the main engine factory requires the price of parts and components to decrease by 8% to 10% each year. It is understood that the host company has recently issued a "double-regulatory" notice to the upstream parts and components companies: the parts and components companies are required to reduce the price within the prescribed time limit. If the upstream parts factory is not implemented, the host plant will cancel its supporting qualifications. .

CKD assembly shock can not be ignored
The CKD assembly vehicle has in fact compressed the profit margins of domestic parts and components companies and has exerted a greater impact on domestic parts and components companies. According to related statistics, in 2003 China’s production of cars was more than 2 million, and about 129,000 CKD-assembled cars, which accounted for about 5% of the total car production. According to relevant experts, a large part of the new domestic models are CKD assembled vehicles, and it is difficult to match the ratio of the parts and components used by companies and companies in the actual production process, and the water content is very high. Relevant information shows that the domestic automobile industry has used CKD assembly methods in a large number in the past two years, and a considerable part of the national auto product import quotas has been allocated to key enterprises to import a full set of spare parts. With CKD complete set of parts assembled vehicle, the price is lower than imported cars, sales are in short supply, profit driven many manufacturers to take this path.

Joint venture parts and components companies tend to invest
Market competition is very cruel. Some joint-venture OEMs and foreign parties use the right of their products, technologies, and capitals to gain discourse, and set obstacles in the disguise of domestic parts and components manufacturers, so that some powerful domestic parts and components companies are Difficult to enter its supporting system. As far as the current market conditions are concerned, foreign investors’ desire for sole proprietorship is strong.

Host plant delimitation limits the development of enterprises
Due to historical reasons, major domestic OEMs all have their own vertical supporting systems and it is difficult to cross-equip the industry. At the same time, the foreign partners who have joint ventures with various OEMs have brought in their own supporting systems, such as the United States, Japan, Germany, and France. The joint ventures prioritize the original supporting system when selecting supporting enterprises in China, resulting in unfair competition.

The above conditions indicate that the current state of survival of China's spare parts companies is not optimistic. Then, where is the development space for China's spare parts companies? The people of insight in the industry believe that, first of all, the OEMs should step out of the short-sighted behavior model of small group interests, consider the long-term development of the company, and earnestly implement the concept of building a strategic alliance with the parts and components companies to create a shared sense of honor and disgrace. This is of practical significance to the parts and components companies. On the support, as soon as possible to improve the R & D capabilities of parts and components companies. Second, give full play to the role of industry associations, pass on corporate voices, coordinate government management, and protect the interests of the industry.