Jinan Bosch Bearing Co.,Ltd , https://www.bosch-bearing.com
"In a few days, I will leave the current joint venture company and return to work in the original state-owned enterprise. I will be reluctant to say goodbye to the place where I worked for ten years." Mr. Wang, deputy general manager of a joint venture in the south, At the end of the contract from the joint venture to the end of this year, it will be dismissed because the foreign company absolutely controls the joint venture company. In the face of reporters, he was overwhelmed after half a year.
What worries Mr. Wang most is the prospect of the company's development. "The joint venture should have been a good thing, but we have no point in the company. We can only be led by the nose by the foreign side. We never have new product development. We can never master the core technology. How can a company have a future? Now, Technology, brand, and market have been monopolized by foreign companies, and the exhaustion of factory resources means that there is no production and management function."
The sales volume of China's auto parts industry in 2004 reached 440 billion yuan, which is almost equal to that of the entire vehicle industry. However, hidden behind it is the hidden worries of foreign investment in the domestic spare parts industry. Industry insiders are concerned that more and more multinational parts and components companies have chosen sole proprietorship after entering China, and the original foreign investors of the joint venture are also moving towards sole proprietorship or setting up a controlling position. Even a joint venture, the core technology has always been in the hands of foreign parties. The auto parts industry will likely be fully controlled by foreign parties.
The trend of foreign monopoly is becoming increasingly obvious
The value chain of the domestic automobile is shifting to the component field. According to the latest forecast of China's total market demand by the Department of Industry and Economic Research of the State Council Development Research Center, the domestic automobile ownership will reach 35.63 million in 2005, 56.69 million in 2010, and more than 100 million in 2020. According to international standards, China's auto parts industry still has much room for improvement.
At present, more than 70% of the world's top 100 parts suppliers are operating in China. There are nearly 1200 foreign-owned or joint venture companies in the Chinese auto parts industry. Foreign investment has accounted for more than 60% of China's auto parts market. In high-tech areas such as automotive electronics and engine parts, foreign-controlled enterprises account for as much as 90%.
Shanghai United Automotive Electronics is a joint venture between Germany's Bosch and China United Automotive Electronics Co., Ltd. In 1996, when United Automotive Electronics was established, it was known as an important milestone in the joint venture of the auto parts industry. However, a reporter recently learned that United Automotive Electronics has been controlled by a joint venture German Bosch.
Bosch's approach is very clever: first use the joint venture company to enter the market. After being familiar with the market, Bosch transferred the profits of the joint venture company to its own subsidiary companies by purchasing high-priced core spare parts, which resulted in the profitability of the joint venture becoming increasingly meagre or lossy. At the same time, Bosch requested to increase its share of the joint venture company, otherwise it will not provide advanced technology. “In the past, joint ventures were also subject to policy constraints, and foreign companies could not take control of key component companies. Bosch and China United Automotive Electronics maintained a 50:50 ratio, but Bosch soon after the introduction of new industrial policies. It has obtained control over the joint venture company," the source told reporters.
Relevant experts believe that there are many foreign-funded enterprises that have expressed their willingness to not join joint ventures and are more willing to establish their own wholly-owned enterprises. Some of them are absolutely in control despite their willingness to joint ventures. They do so to prevent leakage of technology and achieve maximum profitability by having more say.
The weakness of domestic parts and components companies
Compared with international counterparts, China's auto parts companies have small production scale, unreasonable product mix, and weak product competitiveness, failing to form parts and industrial structures that meet the needs of specialized division of labor, and lacking core technologies and development capabilities. In China's spare parts production industry, many companies have sales of less than 1 million yuan. The total market share of the top ten companies in the country’s sales is less than 11%. In nearly a thousand mainstream parts and components companies in China, local parts and components companies are at the bottom of the automotive value chain.
The global auto parts industry continues to develop in the direction of cost reduction. Through joint reorganization and complementary advantages, it has formed a pattern of dozens of first-tier companies, several hundred second-tier companies, and several thousand third-tier companies, fully realizing specialized production and scale. economic. As China's auto parts tariffs continue to decrease, vehicle manufacturers will further implement global procurement. Due to the inadequacy of technology and development capabilities, domestic parts companies will always face the risk of either being merged or marginalized.
Joint ventures need to reflect on the road
The National Development and Reform Commission recently issued an alert in a survey report: The Chinese auto industry has been “over-contracted†and has relied on foreign capital to surpass any country in the world. "The joint venture will not improve the technical level of the factory because the fate of the joint venture is in the hands of the foreign party," Mr. Wang told reporters.
At present, in China, the development expenditure of foreign-funded parts and components companies accounts for only 0.97% of sales revenue, while the proportion of domestic parts and components companies is 1.21%. Many foreign-funded enterprises only use China as a production base for parts and components and have not developed much in China.
Foreign parties have also used China’s technical weaknesses to form a strong voice and firmly hold on to the supporting purchasing power. In the absence of information asymmetry and discourse power, Chinese joint ventures basically have no control over the cost of supporting procurement. Undoubtedly, joint ventures are no longer the ideal choice.
The purpose of the joint venture is to introduce foreign technology, products, capital, and management experience in order to increase our level of technological research and development. The development of auto parts products with independent intellectual property rights and the enhancement of the company’s core competitiveness is the only way for the sustainable development of auto parts in China.