Global Procurement: Double-edged Sword Hanging on the Parts Enterprise

In a recent annual meeting of China's auto parts companies, Tian Fushi, the general manager of FAW-Fuault Automotive Parts Co., Ltd., made a pointed statement about the concept of "global procurement." He called it a "one-sided theory" that may sound appealing in theory but is difficult to implement in practice. According to him, this is because global procurement involves national and corporate interests. When these are threatened, the so-called global purchasing model is often set aside. "They use this theory to control us, and some of us still don't realize its hidden intentions," he said. "We also use it against our own people." As one of China's largest auto parts manufacturers, FAW-Fuault has always been more competitive than many others. However, other industry players have a different perspective. An executive from Oceanic Air-Conditioning Engineering (Dalian) Co., Ltd. expressed concern over the current market situation: "This year’s market is very weak. Due to declining sales by supporting vehicle companies, our sales have dropped significantly. Additionally, with increased importation of spare parts, many companies are adopting SKD production methods. For companies like Beijing Hyundai, we simply can’t get in." Most auto parts companies rely on geographical proximity to support整车 manufacturers, which helps reduce inventory, improve service, and cut costs. Recently, an official from Beiqi Motor Company mentioned that their auto parts factory wanted to support Beijing Hyundai, but the situation remains unclear. "Now, if you want to enter Toyota’s supply chain, it's nearly impossible. Toyota already has its own system, and if you want to join, you’d have to pay 10% more. The cost isn’t worth it," said Tian. Delphi, Denso, and other major suppliers were once part of original equipment manufacturers (OEMs). With 67 million vehicles produced annually, they have strong support systems. In contrast, Chinese automakers only have a few key markets. As Tian put it, "It’s like a two-year-old trying to compete with a 20-year-old in a boxing match. How can you win?" To better understand the challenges faced by Chinese suppliers, a reporter reached out to Delphi Automotive System (China) Investment Co., Ltd. asking whether European, American, Japanese, and South Korean automakers have closed systems that exclude Chinese suppliers. A Delphi representative responded: "Automakers in the U.S., Germany, Japan, and South Korea each have their own standards and requirements for suppliers—on quality, management, and technology. While Chinese companies feel excluded, it might be due to a lack of understanding of those requirements. As a supplier, you must first know your customer’s needs, production processes, quality expectations, and service levels." Japanese automakers, in particular, are known for high demands and long-term trust-building with suppliers. The representative added, "Chinese companies have a cost advantage, but not all of them meet the required standards. Even though Delphi has developed many Chinese suppliers, not all of them are reliable. OEMs tend to be cautious when selecting suppliers, especially when product reliability is at stake." When asked about the difficulty of entering Japan’s supply chain, the Delphi representative noted: "There are differences in product concepts between Japanese and Western companies. We're more familiar with the U.S. and European markets, but Japanese companies are more meticulous in their management and lean production. This makes them more selective. However, we see potential growth in China and hope to supply companies with strong growth potential." Industry experts believe that while Chinese auto parts companies face challenges in the context of global sourcing, the main issue lies in inconsistent standards. Different countries and automakers have varying requirements, making it hard for Chinese suppliers to meet all of them. For example, a cooling cycle test might require 300 trials in China, but only three in foreign plants. Additionally, as vehicle prices decrease, the cost of components also drops—but not for foreign suppliers, who have already established their supply chains in China. These foreign companies come to China to make profits, leaving little room for local players. The reporter also observed that in many Sino-foreign joint ventures, procurement departments are led by foreigners, with Chinese vice ministers holding less influence. This imbalance limits China’s voice in procurement decisions. Despite these challenges, there are opportunities. Many Asian automakers value long-term relationships with suppliers, which gives Chinese companies a chance to step in. While they may currently act as secondary or tertiary suppliers, the goal is to build a stronger position in the future. One industry leader with confidence in China’s potential said: "There are many positions in the supply chain. We can start from the periphery and gradually move forward. It may be difficult to enter foreign OEMs now, but we must keep pushing ahead."

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