A Report on the Development Trend of China's Auto-parts Industry (X)

Part X: Local manufacturers may partly break through the dual bottlenecks of technology and management in the next ten years.

Technology and management are the two current weaknesses of most manufacturing companies in China.

China's manufacturing industry has developed rapidly over the past 30 years and has gained an admirable global status. Making low-, middle- and high-quality products by using low costs has made China-made products dominate every corner of the earth, and China has in fact become the manufacturing center of the world's many industries. Yet, in technology and R&D (research and development), Chinese companies have not moved in lockstep with the global leaders of their industries. As mentioned in Part VI, Chinese manufacturers of auto parts have lagged increasingly farther behind the world's leading companies in cutting-edge technologies. When the global sourcing is booming, Chinese companies have often lost the sourcing orders for lack of powerful R&D capabilities. Therefore, the advantage of low-cost manufacturing is far from enough for most auto-parts makers to compete in the global OEM market. More needed are the technological capabilities of research and development.

A survey by Gasgoo.com shows that in the coming decade many auto-parts makers will begin to consider taking measures to achieve breakthroughs in technical R&D. The possible means of achievement and the scenarios may be as follows:

1. The companies will really boost their investment in R&D, and poach groups of technical talents from other countries where auto-making industries are in the grip of depression;

2. The companies will get and absorb the current world-leading technologies by buying, cooperation or M&A (mergers and acquisitions);

3. The government will issue some policy to support and create a commercial environment for down-to-earth investment in technologies and R&D to reverse the current short-sighted tendency of little technical investment and loss-making R&D.

4. The government should also sponsor the working out of a feasibility study on how to make the breakthroughs in some cutting-edge auto-parts technologies.

5. The double efforts by the companies and the government are expected to build up a commercial culture of valuing technical research and development, to bring the manufacturers up to or near to the world-leading standards in some common technologies of auto-parts making, and to create a relatively mature R&D system in these companies. But in the top technologies of auto-parts making, it is unlikely for Chinese manufacturers to do better than the global leading companies in the next ten years.        

Another weakness is the management. China's local makers of auto parts have weak management abilities generally due to their backward concepts and for lack of experience and talents. The so-called globalization process is essentially the globalization of the management capabilities. The management philosophies and abilities of China's auto-parts manufacturers are comparatively hermetic as shown in their working or thinking styles. This is partly caused by the same impetuous external factors that have influenced China's soccer players' abilities. And that is also why many Chinese companies only produce second-rate products by using the first-rate equipment in the world. Without profound understanding of the essences of the quality control, supply-chain management, marketing of industrial goods, and e-commerce, these companies would rely on their old-fashioned methods and ideas to solve the problems arising out of global competition.

Nevertheless, from their communication and cooperation with global customers, some emerging private companies or new state-run enterprises have learnt how to improve themselves; they have also become good at learning new methods to seize opportunities of gaining favorable scope for their development. We believe that in the coming decade a number of Chinese auto-parts manufacturers will reach the world-leading standards of corporate management in their involvement in global competition.

Related:

A Report on the Development Trend of China's Auto-parts Industry (I)

A Report on the Development Trend of China's Auto-parts Industry (II)

A Report on the Development Trend of China's Auto-parts Industry (III)

A Report on the Development Trend of China's Auto-parts Industry (IV)

A Report on the Development Trend of China's Auto-parts Industry (V)

A Report on the Development Trend of China's Auto-parts Industry (VI)

A Report on the Development Trend of China's Auto-parts Industry (VII)

A Report on the Development Trend of China's Auto-parts Industry (VIII)

A Report on the Development Trend of China's Auto-parts Industry (IX)