Under pressure from OEM customers, Tier 1 suppliers have begun sourcing more components from Chinese suppliers. Over 80 percent of respondents to a SupplierBusiness.com survey, say they plan to buy more parts from local Chinese companies over the next two years. Just under a quarter of all respondents expect to source “substantially more” in the next three years.
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Bosch, for example, is purchasing around €300m from China this year, and plans to more than triple this by 2007. Faurecia has set up a purchasing office in Shanghai. The French seating supplier uses it to qualify and source parts for its operations in Europe and North America.
However not all companies are yet ready to do business in China. “Companies are scared to death of China,” said one supplier executive who was surveyed. “They want to source from China and they want to access the market but they don’t know how to.”
Ford Motor Co. and General Motors are trying to force the issue. They are asking Chinese suppliers to compete for business, and then using Chinese prices as a new global price benchmark for non-Chinese suppliers.
Some Tier 1s say they are now successfully exporting from China. Exports account for around 20 percent of Delphi’s output in China, according to Jinya Chen, President of Delphi China, speaking in an interview with SupplierBusiness.com. However the company is focused on the domestic market. “Delphi’s aim is to keep growing with the Chinese market, and to do as well or better than the market itself,” he said. Delphi says it has been profitable for the last five years. It has around 4 percent of the total Chinese components market, according to consulting firm KPMG. Together, Delphi, Bosch, Visteon and Denso account for 9 percent of the market.
