Tubing Head,Tubing Head Oil,Tubing Head Adapter,Tubing Head Pressure Jiangsu Solid Machinery Manufacturing Co., Ltd. , https://www.oilsolid.com
Interview Guests:
Association Representative:
Dr. Chen Yilong, Director of Asia Pacific at the AIAG (U.S. Automotive Industry Action Group), and Chief Representative in China
Chinese Supplier Representatives:
Zhang Yang, Deputy General Manager and Director of International Trade at Tianrun Crankshaft Co., Ltd.
Expert:
Wenkai Chen, CEO of Gasgoo
Moderator: Many auto manufacturers now include parts and components companies in their supply chains. Most of these components are sourced globally. What are the main reasons behind the concept of "global procurement"?
Dr. Chen Yilong: Global procurement isn’t a new idea, but it really took off after 2001. According to industry surveys, about 70% of automotive companies are looking to source from China. This makes China a crucial player in global procurement.
Wenkai Chen: However, global sourcing is still a relatively new trend and may not last forever. Auto manufacturers usually have long-term relationships with their suppliers, especially when it comes to R&D and logistics. They don’t change suppliers easily. Recently, the top three automakers in North America have started looking for new suppliers in China, which signals a shift from the previous stability. But once China stabilizes, this trend might not continue for long. So, global procurement may not be around for too much longer.
Moderator: What types of products are Chinese buyers more interested in?
Zhang Yang: Currently, Chinese buyers are more interested in products that aren’t highly technical and are easier to produce.
Moderator: For domestic suppliers, facing such large global procurement players, do you feel prepared?
Zhang Yang: For Chinese engine and auto parts companies, well-established firms already have overseas strategies and are actively seeking opportunities. We must seize orders in our own market, while also looking for meaningful strategic partners abroad to support long-term technology and management development.
However, there’s a challenge. Most global procurement is OEM-based, and OEMs require high-quality, stable equipment and production processes. There may be a gap between Chinese suppliers and international standards in terms of quality and technology. This means we need to invest significantly. The international market is currently a balancing act for us.
Wenkai Chen: Zhang Yang’s comments reflect what many Chinese suppliers are experiencing today. We’ve seen it firsthand. Now, the best Chinese suppliers are the main targets for international buyers, but they’re very busy meeting the needs of domestic automakers. These suppliers are in a position where they're “the emperor’s daughter doesn’t marry,†meaning they face challenges when dealing with cross-border procurement.
Moderator: I’d like to ask Dr. Chen. What do you do if a great supplier in China doesn’t want to work with your international buyers?
Dr. Chen Yilong: There are still many companies eager to export. Many recognize that, in the long run, working with OEMs is a good opportunity. On one hand, OEMs have higher standards in quality, logistics, and e-commerce. If you can meet those, you gain a strong position against competitors. On the other hand, winning an OEM contract means long-term strategic cooperation.
Wenkai Chen: In reality, the global procurement situation is complex. It looks promising on the surface, but results are limited. For example, Zhang Yang’s company visits several international buyers every month, but after two years, there are no real outcomes. Why? Because buyers may also have issues.
Moderator: Mr. Zhang, as President Chen just said, are you constantly being approached by potential buyers, but nothing ever comes of it?
Zhang Yang: There are different situations. One is our targeted approach—developing strategic partners. That’s our main focus. Another is passive, where well-known international companies visit us monthly. Some of the products they’re looking for are mature, others are new. New product development takes time and requires significant early investment. For mature products, there may be differences in craftsmanship and engineering capabilities. Also, there’s a mismatch in logistics concepts. Many Chinese companies think shipping goods to the port is the end of their responsibility, without considering how the product will perform in Western vehicles. Some have suffered losses because of this, so they’re cautious.
Moderator: Mr. Chen, as an intermediary between buyers and suppliers, what can you do to improve communication?
Wenkai Chen: The challenges I mentioned earlier are common. The key is helping suppliers meet buyer requirements after both sides understand each other. Vehicle manufacturers worry about quality, process improvements, and initial supply. When problems arise, they often seek help. Many engineers from the U.S. and Europe assist suppliers directly at their factories. That’s a common practice. In logistics, vehicle manufacturers usually handle it through third-party agencies rather than letting suppliers ship directly to North America. As an intermediary, we mainly provide information services. Buyers come to China looking for suitable suppliers, but they may not know where to find them. We help match buyers with the right suppliers.
Moderator: So you’re like a matchmaking agency?
Wenkai Chen: Yes, exactly. China’s supply market changes rapidly, with new suppliers emerging every year. Buyers need to quickly find the right supplier, which takes time and effort. Suppliers also need to choose the right buyers. At this point, we help both sides connect at the information level. In short, we act as a bridge between them.
Moderator: Chinese suppliers are often known for offering low prices. Is this their main competitive advantage? Have you considered improving other aspects of competitiveness?
Zhang Yang: When we make quotations, we leave room for reasonable profit. Many of our calculations are based on the Chinese market’s needs. Buyers sometimes impose international profit margins on Chinese suppliers, which can be frustrating. I wish buyers could better explain their market structure and how they expect us to comply with their rules. With rising labor costs and a shrinking workforce in China, we need to find new profit drivers. Service is one of them. I’m thinking about how to better serve our customers, but communication is still lacking.
Moderator: Mr. Zhang, you mentioned that buyers need more patience. Do you think they have it?
Dr. Chen Yilong: It’s hard to say, but I agree with Zhang. Communication is key. To achieve a win-win situation, we must build good channels and understand each other’s perspectives.
Moderator: What do you see as the future of global procurement?
Wenkai Chen: Predicting the future is difficult. From what we see now, global procurement in China faces some challenges. The renminbi has appreciated by nearly 8% since the floating exchange rate was introduced. Export tax rebates have also decreased. Additionally, buyers had high expectations of China, but many didn’t meet them, leading to lower expectations.
However, overall, the Chinese automotive market will keep growing, and Chinese suppliers are improving their management and cost efficiency. Eventually, China will remain a major hub for auto parts manufacturing. The trend of global procurement centered in China is unlikely to change.
Another trend is that as Chinese suppliers grow in capability and scale, even products with higher technological content may become attractive to buyers.
The automotive industry is inherently global. Domestic companies must adapt to globalization to grow stronger. If a multinational buyer finds you, it can transform you from a local supplier into an international one. This opportunity should be managed carefully.
Even if buyers keep visiting without making deals, it’s still a chance for suppliers to learn. These interactions help identify weaknesses and areas for improvement. Once you meet big buyers’ standards, more will come. Suppliers must seize these chances, even if it’s inconvenient now. Don’t turn them away.