China parts have no discourse power core technology foreign monopoly

One year earned 1.644 trillion yuan, what is this concept? It is only slightly lower than Shanghai's GDP in 2010 (1.687242 billion yuan). This is not the financial industry, nor is it the income of the steel industry. It is the Chinese auto parts industry that has maintained sustained growth in 2010 and its profitability has become the highest in the world. It sounds very gratifying. China's auto parts industry has reached the highest level of profitability in the world, but it does not mean that China's auto parts industry has more patents and core technologies. In fact, apart from the scale, there is still a big gap between China's auto parts and the international advanced level. Despite the rapid increase and rapid growth of China's auto parts companies’ ability to independently innovate, Chinese auto parts companies are still in the era of scale and quick success. With the increase in scale and profitability, where do Chinese auto parts companies go? Is it the pursuit of expansion and profitability, or is it moving from scale to technology? Fu Youwu, executive vice chairman and secretary general of the China Automobile Engineering Society, explained.

Executive Vice President and Secretary-General of China Automotive Engineering Society Fu Yuwu

The core technology is still monopolized by foreign capital

Reporter: China's auto parts industry is the world's most profitable, and is becoming a global automotive parts manufacturing base, which can illustrate the core technology of Chinese auto parts companies to upgrade, export value-added high? How to treat this phenomenon?

Fu Yuwu: China is becoming a global production base for auto parts. We cannot use good or bad to evaluate it. We must treat this matter dialectically.

The rapid development of China's auto parts industry through 30 years of reform and opening up has enabled it to support an annual production capacity of 18 million vehicles and meet the supporting requirements for more than 80% of parts for commercial vehicles and mid-to-high-end passenger cars.

Due to the production of automotive products in China, most of the necessary parts and components can be manufactured in China. Therefore, China is becoming an important procurement base for international automakers and a research and development base for core products of multinational corporations. China's auto parts and components exports continue to grow, and the products enter the international auto manufacturing and after-sales accessory markets. It is an important production base for the world's auto parts and a research and development and testing base for new products.

However, the overall strength of domestic-funded parts and components enterprises is weak and the development investment is insufficient. The main products are still at the low end of the supply chain, and the core technology of key components is monopolized by foreign-funded enterprises. The low value-added technology, high resource consumption and lack of brands of parts and components have not changed.

Reporter: The scale of China's auto parts and components industry continues to expand, and the profit level is also the highest in the world. However, the technological gap is increasing with foreign countries.

Fu Yuwu: The gap between China's auto parts products and the world's leading level in high-end technology has not gradually narrowed with the continuous growth of China's auto industry, but has instead expanded. The core technologies and key technologies that China's auto parts industry lacks independent intellectual property rights have greatly hampered the auto industry's independent innovation and independent development.

If the structural adjustment of the parts and components enterprises is completed well, it will, to some extent, stimulate the process of internationalization of the entire Chinese automobile industry. It is not only a kind of foundation, but also a kind of forerunner. It will realize the internationalization of the whole vehicle enterprise before it.

Reporter: One noteworthy phenomenon is that although China's auto parts industry has the highest profitability level in the world, it cannot see the names of Chinese companies in the top 100 auto parts companies worldwide.

Fu Yuwu: At present, sales of SAIC, FAW, and Dongfeng's three major auto companies can enter the top ten of the world's entire vehicle fleet. However, one very embarrassing phenomenon is that none of the world's top 100 auto parts companies has a Chinese company. This is a very sharp question. In 2010, there were 3 South Korean companies in the world's top 100 auto parts and China still had no shortlisted. This reflects how far China has differed from foreign countries in auto parts.

Chinese parts companies have no say

Reporter: Parts and components do not go technically, and they are blindly pursuing scale, which will have a great influence on the recognition of China's independent brands going international.

Fu Yuwu: Yes. Judging from the current status of the Chinese auto market, the parts and components industry has become a bottleneck restricting the development of self-owned brands. This verifies the old saying "whether the vehicle can go up, the key to see parts." Auto parts and components are the basis of the entire vehicle industry. If we want to become stronger brands, we must first do strong local components. This issue is not resolved. It is only empty talk to strengthen the auto industry.

The parts manufacturers believe that the problem lies in the fact that many local parts and components companies are not only difficult to get into the supporting system of mainstream cars, but even some of the first-line brand repair market is also more difficult to enter. This kind of paralysis has affected the brand image of self-owned brands. In the face of severe market competition, the industry believes that the key is still no strong local parts and components companies to support, in the industry have limited power to speak.

Reporter: Are parts lacking core technology and are they caused by the overall environment?

Fu Yuwu: Our systems and mechanisms have limited many innovative thinking and innovation capabilities. What is China now? What is worse is the core technology. How does the core technology be solved? It depends on innovative talents, which need to be nurtured and discovered. A tolerant environment encourages innovation, encourages innovation, and tolerates failure.

It is very important to encourage a group of people of insight to enter the parts and components business. In today's auto parts companies, few engineers are steadfast and can endure loneliness for learning. In fact, the problem of technology must be solved by someone who understands technology. It must be accumulated for many years before it can be gradually developed.

In addition, we must establish an academic atmosphere of tolerance for failure. Core components are not a field and often involve basic things, so we must be tolerant of failure.

Reporter: Compared with the entire vehicle, the technology of China's auto parts enterprises has not been significantly improved. Is merger and acquisition a shortcut for them to upgrade their technology and go international?

Fu Yuwu: Relative to the development of Chinese vehicle companies, the development of China's spare parts industry lags behind. It is a good thing that Chinese parts and components companies can go out and buy GM's steering business. They should be encouraged.

The development of China's auto parts industry is crucial to the innovation and development of self-owned brand cars. However, the parts companies of Chinese self-owned brands have been lagging for a long time, whether they are self-owned brand auto companies or joint venture brand auto companies. They are reluctant to adopt domestic parts and components and their credibility is not high.