Car manufacturers and suppliers have issued press releases several times and plan to substantially increase the amount of auto parts purchased in China – all thanks to the rapid development of the Chinese market, low labor costs, and significantly improved product quality. These announcements, together with the competitiveness of Yufeng’s overfull-bodied Chinese products, and even the influx of Chinese auto parts in the future, have caused an increase in anxiety among US suppliers, especially for small manufacturers and their employees.
Ford Motor Company purchased about $1 billion worth of auto parts in China in 2004, most of which will be used in China's auto production. The GM vice president who is in charge of the global purchasing business expects that by 2009, the total value of auto parts purchased by GM from China will be as high as US$4 billion each year to supply GM auto assembly plants outside China.
In addition, GM plans to purchase an additional $6 billion worth of auto parts from China to meet the needs of its manufacturing and manufacturing plants in China. Radio devices and other electronic devices are expected to become China's export products. From 2000 to 2003, Chinese car radios, tape cassettes, and CD players exported to the United States rose by 38%. Chrysler is also looking for suppliers around China to supply low-cost parts to its global production plants: it also has its Mercedes-Benz auto manufacturing plant in Beijing, and has opened up local supply channels for parts.
Delphi’s auto parts purchased from China in 2003 were US$247 million. The company’s purchases in 2007 increased fourfold to US$100 million. Crude and rough castings imported into the United States are also expected to climb. For example: EaglePicher Motor Company specializes in the manufacture of machine components, rubber, metal coatings and paper-coated gaskets. At present, from the perspective of reducing costs, China is now importing rough-fabricated drive shaft flanges, slip lanolin, and crank shaft assemblies made in China. The auto parts were made from Chinese raw materials, and Eagle Picher processed the final precision at the American factory and then sold it to American automakers.
China's low wages greatly offset the transportation costs of parts, which in turn makes part of the parts cheaper (depending on the size of the parts and the complexity of the process). EaglePicher also plans to use a Chinese joint venture to supply auto parts directly to automakers in China.
At the same time, Japanese and European suppliers are also stepping up their investment in China. To cushion the pressure on the appreciation of the euro against the Chinese renminbi, Vokswagen announced in early 2004 that it will cut the total number of auto parts exported to China from China by half in the next five years. In addition, Volkswagen plans to invest 6 billion euros to build and expand its joint venture manufacturing plant in China, with large investment funds going to auto parts manufacturers.
View related topics: Commercial Vehicle Export Analysis
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