Why is a huge local component company only worth a spoonful?

As China secures the throne of the world’s largest automobile production and sales powerhouse, and many other global automotive markets have not yet fully recovered, multinational parts and components companies have also begun betting on the Chinese market, capital increase, new production base or R&D center, etc., hoping to take this into consideration. Get bigger cakes.

In fact, overseas acquisitions of domestic parts and components companies have been under way in recent years. If Geely acquired DSI Automatic Transmission Co., Beijing Jingxi Heavy Industry announced the acquisition of Delphi related equipment, AVIC Automotive and Beijing Yizhuang International jointly acquired Nexteer Automotive Systems, Ningbo Junsheng acquired German microcontroller manufacturer Preh, and so on. Some time in the future will also form a trend of overseas acquisitions.

According to industry insiders, some spare parts companies in China already have the R&D capabilities for individual parts, but they lack the ability to integrate parts solutions. Practice has proved that if the joint venture can not be replaced by core technologies, it must be independently developed or acquired by acquiring small and medium-sized high-quality automobile parts and components companies with technical characteristics overseas to master the core technologies.

Overseas acquisitions are indeed a shortcut. It is important to encourage domestic-funded enterprises to acquire overseas key technology companies and overseas R&D institutions to provide support and assistance in terms of policies and funds. However, we must be wary of whether the purchased technology is accompanied by a patent. If there is no patent right, even if 100% of the company’s shares are purchased, it is still not its own.

Finally, the construction of auto parts export bases should be further strengthened. This is not only of great significance in promoting the sustainable development of the automobile industry, but also conducive to alleviating the contradiction of overcapacity in the domestic market and accelerating the structural adjustment of the automobile industry; facilitating the promotion of independent innovation capabilities of enterprises and developing their own brands; facilitating the regulation of export order and protection Intellectual property. Relevant departments should organize joint research, select a number of key components and assemblies, and organize domestic enterprises to jointly tackle the problem. To exert the power of the entire group company, it must be clear that strong autonomous autos must match strong autonomous components. Do bigger and stronger first to form a scale effect.

Some people in the industry also stated that apart from overseas acquisitions, more importantly, independent research and development, and now most domestic self-owned parts and components companies are engaged in individual combat operations, and investment in R&D is very weak and they need to increase investment. Therefore, the state should give policy incentives and strong support to the auto parts industry, especially key parts and components and the automotive electronics industry, and provide support and assistance in policies and funding. The state should accelerate the development of a special development plan for the automotive electronics industry. The automotive electronics technology is the core technology of the automobile. 70% of the technological advancement and innovation in the automobile industry originates from the development of automotive electronics technology.

At the same time, it is necessary to formulate a supportive policy to cultivate key domestic spare parts enterprises to improve the level of technological research and development and their core competitiveness. At present, the average R&D investment of China's spare parts enterprises accounts for only 1.4% of sales revenue, far below the international average of 6.6%. Therefore, it is recommended that relevant national departments put forward a catalogue of key parts and components that will support research and development, and give policy support to domestic companies in R&D investment in fiscal, taxation, and finance. A state-of-the-art core technology competition and basic R&D platform should be established. The state supports R&D investment, signs contracts with vehicle companies, scientific research institutions, and parts and components companies and achieves tripartite benefit from R&D results.

At present, there are more than 20,000 domestic parts and components companies in China, including nearly 8,000 auto parts enterprises above designated size. However, there are few real scale requirements and the industry is very fragmented. At the same time, local parts and components companies generally have weak independent research and development capabilities, product convergence, and low technological content, especially the core technologies of the main car assembly and key components.

The embarrassing reality is that local parts and components companies account for 80% of the total number of parts and components companies, while sales only have 20%, and 90% are concentrated at the low end.