NTN：Key technology is the foundation for automotive market survivors

The Eleventh Edition of a Series of Interviews with MNC Auto Parts Suppliers

To expand production capacity in China

Gasgoo: Thank you to accept our interview. Firstly, please briefly introduce NTN to us including your main products.

Chan: NTN is a producer of all types of bearings. Its products are supplied to several markets including the automotive market. We attend the Shanghai Auto Show to promote our parts that are widely used in autos, and to make them well-known by the general public in China.

Gasgoo: Can you illustrate NTN's development in China?

Chan: The production in China was started from, about the year 2003. Now we have six factories in China: Shanghai NTN Corporation in Songjiang District of Shanghai, NTN-NIDEC (Zhejiang) Corporation, Guangzhou NTN-Yulon Drivetrain Co., Ltd., Changzhou NTN-Guangyang Corporation, Beijing NTN-Seohan Driveshaft Co., Ltd., and Shanghai Tungpei Enterprise Co., Ltd. in Songjiang District of Shanghai, a joint venture with Taiwan TECO Electric & Machinery.

Gasgoo: How much does  Chinese business account for your global business?

Chan: The sales in China, including Hong Kong account for a very small portion by 2006, maybe only 3%-4%.

Gasgoo: What are the reasons for that?

Chan: We entered the Chinese automotive market very late, since 2003, and our production capacity is still not large enough to supply for many large companies. We need time to expand.

Gasgoo: Do you have any development plan or strategy for the Chinese market in the future?

Chan: Yes, we have plans for the Chinese market. Now we supply to many foreign invested enterprises, most of which are large Japanese companies, such as Honda, Toyota, Mazda and Mitsubishi. We'd like to first supply the new products to the Japanese companies in China. But we will also gradually supply to the European companies as the production capacity increased.

Gasgoo: Globally, which customers does NTN have, except for the Japanese OEMs?

Chan: NTN is actually a large international company, and have not just invested and established factories in China. Our bearings are widely used in many industries, of which automotive industry is very important. NTN is an automotive supplier not only for its homeland companies like Toyota, Honda and Nissan, but also for other globally famous companies in America and Europe, such as General Motors, Chrysler, Renault, PSA, Benz and BMW. It does still not completely demonstrate our business relationship with European brands through the six factories in mainland China. Anyway, we will gradually supply for more European customers in China.

The Chinese auto industry: Still a long way ahead

Gasgoo: What's the difference of developing business in China and in other countries? For example, the production cost in China is lower, and you can get local customers as well as international customers.

Chan: Yes. I know Geely, Chery and Lifan. These local brands represent the trend of the Chinese automotive industry. But they are very fresh in the automotive industry. They try to develop themselves through capital investment and cooperation with foreign companies because now their technologies research and development ability is still weak. They want to improve their R&D ability through this cooperation. The automotive industry is technology-intensive consisting of a great deal of technologies, which makes it different from other industries.

Gasgoo: what about your relationship with Chinese brands?

Chan: China now has four famous local brands: Geely, Chery, Biyadi and Lifan. The Chinese government hopes the automotive industry reach a certain level but they adopted the strategy of low cost. Their products' prices are relatively lower for foreign companies. But you know good money, good quality. Customers have their own considerations on products they choose. I think every country hopes to have its own internationally famous brands. The Chinese government has the intention that domestic suppliers can cooperate with foreign companies so that they can learn new and advanced technologies from foreign companies, and also hopes the Chinese companies can improve their technology in a certain period. However it’s hard to develop the automotive industry comprehensively in a short time.

Key technology is the foundation of success.

Gasgoo: That's to say, the development speed of the complete vehicle market is very important for hi-tech enterprises. Is the technology advancement of OEM one key push for your development?
 
Chan: Yes. The reason why the sales of some auto brands always rank very high is that its brand's influence and products' quality. When these brands' businesses expand globally, their good quality is recognized by more and more customers, so the brands have very good reputation. The Chinese local brands are only developing in China now. If they export, they have to make other countries accept their quality. They have to use better engine, transmission case, rear bridge and chassis, etc. to make the car more secure and can be used for a longer time, because those are also what the customers pay much attention to. To improve the Chinese automotive industry and reach their goal, the local brands and the government must work together to improve the technology and quality.

Gasgoo: It must be a good opportunity for NTN?

Chan: Certainly. There are a lot of automotive component companies in China. You can also see many at this auto show. It is a good place to communicate and find some factories of better quality and services to cooperate with.

Gasgoo: I think, a company like NTN in the booming Chinese market can get much more advantages than in other countries, for example, the advantage of low cost. Can those advantages be taken in the consideration of making it an exportation base and R&D center? Do you have such considerations?

Chan: Yes, we have. We talked about the importance of brand effect. Moreover, the R&D ability is also very important. Many companies in China don't have much R&D ability, so they can only copy others. But large companies have many R&D centers all over the world, which mainly located in Europe, America and Japan. Our R&D center in China is scheduled to establish after 2007, maybe 2008, to develop products for the Chinese market. In the beginning no company is willing to bring in their top technologies. Technology is the ace of a company, without which it's very dangerous for a company.

Gasgoo: Do you have any consideration on export from China?

Chan: Yes. But our capacity is not large enough to meet the Chinese market, so it's not the time for us to export yet. We will export when the capacity is large enough, and put some of the productions for export in China.

Gasgoo: How is your sourcing in China? Many companies have been doing China sourcing, supplying to their plants in other countries with low cost products. What about NTN?

Chan: We are also doing that. The Chinese government hopes the large companies invested in China gradually localize their production. Localization is the first step for any foreign companies who want to develop and compete in China. If the Chinese suppliers can provide auto parts and materials with good quality, we will certainly buy their products, or it's not easy to reduce cost. But before we purchase in large amount, we have to test the quality first. But China sourcing is certain to do. Many large international companies have set up International Purchasing Office in Shanghai or other cities in China. In order to buy much cheaper products, many of them hire the local people to contact the auto parts suppliers. But cheap products can only be purchased when their qualities are also good. Cheap products with poor quality will damage the brand. So it's no doubt to do China sourcing, but the quality must be carefully tested. For example, the quality standards of Chinese steel and imported steel seem to be the same, but their internal structure and stability may be different. You can not find the faults until you examine them carefully in actual sourcing.

Gasgoo: Do you have any five-year plan in China?

Chan: Large companies like NTN don't necessarily have a ten, five or three year plan. Our investment in China is settled, and we will expand our business by bring more equipment and technical here. We hope to make more progress here.

Gasgoo: Thank you very much for your time.

 All rights reserved. Please notify the source for any use.