SHENZHEN Haitian Shikai Co Ltd's General Manager Wang Yi is happy to talk about last year's business performance. The auto parts maker's sales doubled to four million yuan (US$519,000) last year on the strength of more exports.
"We expect revenue could rise another 50 percent this year as overseas car makers have more interest in sourcing mainstream lineups because the savings could be huge even on a single model," Wang said.
Haitian Shikai, which produces compressors, evaporators, condensers and expansion valves, is among the growing number of domestic component makers for small cars that are eager to grab a bigger slice of booming auto parts exports.
Sourcing parts made in China is a new trend for many overseas car makers after they shifted production to developing countries when intensified market competition and price increases for raw materials started putting pressure on profits.
The United States, the world's largest auto market, imported US$6.9 billion worth of auto parts from China last year, an increase of 28.1 percent from 2005, according to the United States Department of Commerce.
Meanwhile, China's car components exports soared 36.3 percent during the same period, surpassing the total vehicle market's growth of 25 percent.
China is one of the hottest sourcing destinations not only due to its rapidly expanding vehicle market, but also due to its huge market potential and lower labor costs that may be as much as 30 percent.
"The growing demand for cutting costs makes the price advantages of domestic makers more obvious," said Chen Wenkai, chief executive officer of Gasgoo.com, a sourcing Website for domestically-made auto parts. "It will continue to grow rapidly as we found that sourcing in China is still in its infancy stage," Chen added.
Problems for global auto giants sourcing parts in China include quality and supply chain management.
Quality issues have blocked domestic car parts firms from supplying core spare parts to auto makers, leaving major overseas suppliers such as Bosch, Delphi, Visteon and Dana to dominate. The industry is also obsessed with unsatisfactory logistics, lack of access to information overseas and intellectual property rights.
Many smaller Chinese auto parts makers once based products on copying a sample from overseas competitors. The tactic prevented such firms from mass exports to mature markets like the US and Europe. "Some of the problems are rooted in not knowing market rules or market needs in the US," Haitian's Wang said.
He also admitted some overseas buyers need to be more patient while helping Chinese counterparts improve product quality. Wang said it may take even longer for overseas buyers to find new reliable partners in the highly fragmented industry. "Given time, we think things can change as local suppliers are getting opportunities to improve their capability," Gasgoo.com's Chen said.
Besides buyers and suppliers, logistics firms also find obstacles that add to procurement costs when shipping to overseas markets from China.
"The advantage of lower sourcing costs can be eaten up by inefficient logistics, especially for long distance transport," said William Villalon, vice president of logistics and product development at APL Logistics.
Sourcing from China has resulted in a longer supply chain along with more risks and higher demand for inventory management. The logistics company is considering forming more alliances with domestic companies to increase its competitiveness and provide a better transport network to its customers, according to Villalon.
Source:佚名