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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 reasons behind the concept of “global procurement�
Dr. Chen Yilong: Global procurement isn’t a new concept, but it really took off after 2001. According to industry surveys, 70% of automotive companies have started sourcing from China. This shows how important China has become in the global procurement landscape.
Wenkai Chen: However, global sourcing is still relatively new and may not last long. Automakers typically maintain close relationships with suppliers due to R&D and logistics collaboration. It’s rare for them to switch suppliers. 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 last. So, global procurement might not be around for too long.
Moderator: What kind of products are Chinese buyers more interested in?
Zhang Yang: Currently, Chinese buyers tend to focus on products with lower technical content and easier manufacturing processes.
Moderator: For domestic suppliers, facing so many global procurement giants, are you prepared?
Zhang Yang: Chinese engine and auto parts companies are already developing overseas strategies and actively seeking opportunities. While the domestic market is growing fast, we must secure local orders first. For international OEMs, we look for strategic partners who can support our long-term development in technology and management.
However, there are challenges. Global procurement is mostly OEM-based, requiring high production stability and technical standards. Our quality concepts and equipment may still lag behind foreign counterparts, which poses investment challenges. The international market is a balancing act for us right now.
Wenkai Chen: Zhang Yang’s comments reflect what many Chinese suppliers are experiencing. We’ve seen it firsthand. Top Chinese suppliers are now the main targets for international buyers, but they’re also busy meeting domestic demand. These suppliers are in a position where they’re “the emperor’s daughter doesn’t marry,†meaning they face selection pressure when dealing with cross-border procurement.
Moderator: Dr. Chen, what would you do if a great Chinese supplier isn’t selected by international buyers?
Dr. Chen Yilong: There are still many companies eager to export. They understand that, in the long run, supporting OEMs is a good opportunity. On one hand, OEMs have high standards in quality, logistics, and e-commerce. Meeting those standards puts you in a strong position against competitors. On the other hand, winning an OEM contract means long-term strategic cooperation.
Wenkai Chen: In reality, global procurement is complex. The surface looks promising, but results are limited. For example, Zhang Zong often meets international buyers every month, but after two years, there’s little progress. Why? Buyers may also face their own challenges.
Moderator: Mr. Zhang, does it feel like you're being courted every day but nothing ever comes through, as Dr. Chen mentioned?
Zhang Yang: There are different scenarios. First, we target specific strategic partners. That’s our main focus. Then, there are passive situations where well-known international companies visit us monthly. Some products they seek are mature, while others are new. New product development takes time and requires early investment. For mature products, there's a gap in understanding between craftsmanship and engineering capabilities. Also, logistics concepts differ. Many Chinese companies think shipping goods to the port means the job is done, without considering what happens once the product reaches Western markets. Some have suffered losses because of this. Hence, buyers are cautious.
Moderator: Mr. Chen, as an intermediary between buyers and suppliers, what can you do to improve communication issues?
Wenkai Chen: The challenges I just mentioned are widespread. The key is helping suppliers meet buyer requirements after both sides are familiar. Vehicle manufacturers worry about quality and process improvements after selecting a supplier. If problems arise, they may need help. In fact, many quality engineers from the U.S. and Europe assist suppliers in improving their products and technologies directly at the factory. That’s common. Regarding logistics, vehicle manufacturers often use third-party agencies to manage shipments from China instead of letting suppliers handle it themselves. As an intermediary, our role is mainly information service—helping buyers find suitable suppliers in China, matching them effectively.
Moderator: So you’re like a matchmaking agency?
Wenkai Chen: Yes, exactly. China’s supply market changes rapidly, with new suppliers emerging each year. Buyers need to quickly find the right ones, which can be time-consuming. Suppliers also need to choose the best buyers. At this point, we help both sides connect at the information level. We act as a bridge between them.
Moderator: Chinese suppliers are often seen as offering low prices. Is that their main competitive advantage? Have you considered improving other aspects of competitiveness?
Zhang Yang: When we submit quotes, we usually leave a reasonable profit margin. Many of our calculations are based on the Chinese market’s needs. International buyers often expect higher profit margins, which makes their patience and guidance toward Chinese suppliers slightly less. I hope they can explain how their market works and what they expect from us. We also face rising labor costs and a shortage of skilled workers. Finding new profit growth areas is essential. Service is a big part of that. I’m thinking about how to better serve our customers, but communication is still limited.
Moderator: Mr. Zhang, you said buyers need more patience. Do you have that patience?
Dr. Chen Yilong: It’s hard to say, but I agree with Zhang. Communication is key. Establishing a good channel and understanding the other side’s perspective will lead to win-win outcomes.
Moderator: What do you see as the future of global procurement?
Wenkai Chen: Predicting the future is tough. From current trends, global procurement in China faces some challenges. The renminbi has appreciated nearly 8% since the floating exchange rate system began. Export tax rebates have also dropped. Additionally, some buyers had high expectations of China but found reality falling short, leading to lowered expectations.
However, overall, China’s auto market will keep growing. Chinese suppliers are improving their management and cost efficiency. Eventually, China will remain a major center for auto parts manufacturing. The trend of global procurement being centered in China won’t change.
Another trend is that as Chinese suppliers’ management improves and economies of scale develop, even products with higher technical content may enter buyers’ consideration.
The automotive industry is inherently global. Domestic companies must adapt to globalization to grow stronger. If a multinational buyer finds you, you could move from a local to an international supplier, possibly becoming a large global company. Such opportunities must be seized.
Even if buyers come frequently but no deals are made, it’s still a learning opportunity. It allows suppliers to understand buyer needs and identify areas for improvement. When you finally meet the requirements of big buyers, they’ll come to you naturally. Suppliers should seize such chances—even if it’s annoying now, don’t refuse.