Tang Fan (assumed name) is an engineer of a china automobile engine company. He felt pressure on the return of work this year 2020. What exactly is this?
Last year, this Chinese engine company dropped off the line with a new engine product. Thanks to the application of many advanced patented technologies, the injection pressure was increased, friction losses were reduced, and many industry experts were impressed. The company became a star of hope with a wide range of applications and many orders.
Due to the sudden outbreak of the COVID-19 at the beginning of the year, the company slowed down its original production pace. After the major milestones in the prevention and control of the domestic epidemic, the new engine, which should have continued to be very impressive, was also prevented from supplying the imported parts and components that were used.
On 8 June, the Director-General of the World Health Organization, Cezanne Tam, warned at an epidemic briefing that the global situation about COVID-19 was deteriorating, with more than 100,000 new confirmed cases reported to the organization in nine of the past 10 days. For the automotive parts and components supply chain, the global new crown pneumonia epidemic remains the sword of Damocles hanging over the head.
Domestic enterprises are prepared for the lack of supply and the fixed delivery period
“The high-pressure oil pump we use is the product of a leading international supplier of first-class automotive parts and components. It is technically mature and has good performance and is manufactured by the company’s Italian factory.” Tang Fan told the reporter of the China Automobile News that such accessory parts are usually propaganda-oriented by enterprises, but now they have become their annoyance because of supply problems.
He said, “As a consequence of the epidemic, Italy has only partially achieved a resumption of production. Only one of the four production lines has been restored in the factory that produced high-pressure oil pumps for us. The most significant impact on us in the short term is the lack of supply caused by the uncertain delivery of spare parts. This triggered a chain reaction that delayed the original delivery plan.”
“The global spread of the epidemic has indeed caused trouble for many china domestic enterprises that rely on imported car parts and components. What I learned is that many businesses have a certain safety stock that can last for a while, but I am afraid that going on will face a serious challenge.” Shen Bin, minister of the Ministry of Technology and Economic Consulting of China’s Automobile, introduced the news to the reporter.
“The risk of supply interruption exists, and the extent to which imported parts and components are restored depends on the control of the overseas epidemic. ” Li Shengqi, secretary-general of the China Automobile automatic transmission Innovation Alliance and secretary-general of the gear drive industry section of the Central European Association, said, “The situation in the critical parts and core components field is different. While some international component giants were laying out in China, they built the core component production line to achieve the effect of increasing the response rate and lowering costs. With the domestic epidemic under control, these products have largely returned to normal supply. However, there are still some core components that need to be supplied by overseas factories. With the digestion of stocks and the development of the epidemic, there is a risk of supply interruption.”
“Whether or not the supply of imported car parts and components can be restored is highly related to the degree of control of the epidemic. I believe that the suppliers in Japan and Korea are the fastest, with German-led European companies following, and the most variable is the U.S.-led North American supplier.” Wang Hong, secretary-general of Ningbo Automobile Parts Industry Association, believes.
To overcome such difficulties, many domestic parts and components companies have taken early action to cope with them. It is learned that Tang Fan’s company has a portion of its stock and can be used for at least some time.
A related official of the laser radar company, Superdata, said, We made the worst-case forecast for the development of the epidemic before the Chinese Spring Festival, and made the most preparations for it, including supply chain, production, and production. Logistics and other problems have been well-planned, so the impact on them is minimal. The supply capacity of the company’s laser radar products has been fully restored as early as the end of March this year.” He also told reporters that since there are sufficient options for the supply of core components, and because of the high degree of the national production of the products of Tengteng, the price, and supply of components have not been affected.
Similar to the “deep digging of holes and extensive grain accumulation” is Wan An Technology. “Our management team has made strategic plans ahead of time. This work has already been started since the beginning of the Sino-US trade friction. ” Wan An Technology Related Person said.
In addition to variable delivery times, imports of critical components face a problem — the possibility of price volatility. Before that, there have been reports on many occasions that car parts and components are facing a general increase in price. “Most Chinese domestic companies use CIF quotes when purchasing imported auto parts and components. Under the impact of the epidemic, many of the core components were transported by sea and are now transported by air.” Wang Hong told the reporter, “Due to changes in transportation ways, the purchase cost will increase even if overseas suppliers keep the prices of their products the same. ”
“Individual enterprises may also increase their prices, but not yet realized, and the probability of a large increase in the price of components as a whole is not very high. ” Li Shengqi said, “Even if some parts increase in price, downward conduction is normal.” He also said The price of core components is unlikely to fluctuate. Their largest market is in China. If foreign-funded enterprises take advantage of this opportunity to increase their prices, they will be at risk of losing their customers in the long run, though they may increase their profits in the short run.”
Some products are dependent on imports, which is a very reactive situation
Earlier, in an interview with CCTV, Chang An Automobile executives said that after a good deal of work, it was found that more than 3,000 auto parts and components in its supply chain involving more than 100 suppliers were produced in overseas markets, covering 23 countries and regions, and most of the epidemic situation was serious. Ensuring smooth supply chains in these countries or regions is complicated
The major impact of the overseas epidemic on domestic enterprises is those core components that are “not available”. The global spread of this epidemic has made people feel that the supply of automotive parts and components is very serious. Once the core auto components cannot be delivered, and china enterprises cannot find alternative products in the country, the safety of the industrial chain is directly affected.
“We should analyze the impact of domestic enterprises being constrained by the supply of core automobile parts and components in different sectors, and the differences are still quite large. ” Shen Bin told the reporter: “After so many years of development, china domestic enterprises can supply the main core components such as engines, transmissions, and axles. However, some of the products involved in automotive electronic systems, such as control modules in automatic transmissions and most of the chip-type components, mainly depend on imports.” Wang Hong said: “We still have a very high degree of dependence on overseas countries for components in the electrical control category and chip category. ”
“Hydraulic torque converter, solenoid valves, sensors, some high precision high speed, low noise bearings (ball and needle bearings) in the automatic transmission, steel bands in CVT, friction material in synchronizer in DCT, modules for dual-clutch, TCU, We still need to import these parts Li Shengkqi said frankly, “There are still some areas where there is a lack of capacity, such as the ability to calibrate the entire vehicle. Many enterprises rely on foreign teams. Some models are upgraded on an original basis and they are relatively easy to resolve. However, it will be difficult to develop new car models. Similar to this is the development of functional security, which we have not invested much in before.”
“European and American enterprises are at the leading level in the fields of engine and control systems, high-end transmission, electric jet system, exhaust system carrier, computing platform, chip, autonomous driving, development tools, etc. Japanese and Korean enterprises are in high-end transmission, liquid crystal device, electronics, electrical, integrated circuit, There are significant advantages in areas such as thermal systems.” Du Dao Feng, director of the Parts Department of the China Automobile Industry Association, told the reporter.
Self-production will replace imports and will eventually yield gains by insisting on cultivation
“This epidemic has a great impact on the production of spare parts and products and has also driven us to carry out changes in the supply chain. In the long term, it will make the internal mechanisms of the company more flexible, and promote the building of the enterprises’ own supply guarantee and control capabilities. ” Tang Fan told reporters that his enterprise has started the work of replacing parts and components domestically and has accelerated the progress of the verification. However, the production of new engines may not meet the expected target before switching domestic components. It is also possible to drop by 20%. He said, “The difficulty is that the company needs to strictly verify and approve its local suppliers to guarantee product and brand quality.”
“self-production is a real proposition.” Shen Bin said, “For example, Tesla, is even more aggressive in its localization than some joint ventures, as a latent newcomer to the production in China. The economic support radius of the parts and components is certain. Local component suppliers are complementary to foreign-funded enterprises, which will help them upgrade their technology and product level, thus further accumulating and consolidating the foundation for the realization of independent substitution.”
“self-production is a real complex process.” First of all, the initiative is in the hands of the complete vehicle enterprise and the first-level suppliers. Second, the unique IATF16949 management system in the automotive industry has determined that the components of the whole car company cannot be replaced randomly. It will take some time to find an alternative company,” he added. Wang Hong said, “We still lack a voice in foreign-funded enterprises. Therefore, it is the china local auto-motor enterprises such as the Great Wall, Gili, and Chery that should be the first to achieve a breakthrough in independent replacement. The independent brand has also tasted the taste of being influenced by people in the process of growth, and maybe more receptive to independent suppliers.”
“The supply of a whole-car enterprise is restricted due to the impact of the epidemic on the import of parts and components. This company reflected this situation with us. There are local enterprises in Ningbo that can provide products of the same quality. Whole-vehicle enterprises are also surprised, and they have been using imported parts and components. They neither know nor believe that domestic products can replace those imported auto parts On our recommendation, the domestic suppliers have made replacement of the imported parts.” The Ningbo Automobile Parts Industry Association, where Wang Hong is from constantly provides advice and serves, “self-production products replacement is a long process, and the government should play an active role in this process.”
“self-production products replacement still requires the government to take the lead and provide some support. For example, enterprises have to pay a lot of human, material, and time in the R&D and production process, and the unit price would be slightly higher than the prices of overseas suppliers. Foreign-funded enterprises, however, will sometimes use their existing advantages to guarantee their share using lowering prices because their products enter the market earlier.” Shen Bin said: “Chinese Domestic enterprises have accumulated a certain amount in many technical fields. Previously, they lacked complementary opportunities. Now, we should work hard to open up markets. IGBT chips are likely to be replaced quicker, and intelligent network components, including laser radars, are also a breakthrough.”
It is understood that before 2016, China’s laser radar still depends very heavily on imports. However, in recent years, the vast majority of automatic driving enterprises have replaced imported products with domestically produced laser radars. In March this year, Nagoya University and TierIV released 12 laser radar tests for many well-known enterprises around the world. China’s products such as robosense and Yitenyoton have performed well, and many performance indicators have reached or even outperformed overseas manufacturers. Also, robosense’s 128-line laser radar RS-Ruby, the world’s first production, has been tested by several head unmanned enterprises and has received favorable reviews and numerous orders.
“Thanks to the china’s effective prevention and control of the epidemic and the enterprises themselves’ full preparation, our product supply has stabilized during the epidemic, and the advantages of the national production of laser radar have been fully demonstrated under the epidemic. ” Said the person responsible for robosense
Special Interview: Li Shengqi, Secretary-General of the China Automobile Transmission Innovation Alliance and Secretary-General of the China-Europe Association’s Gear Transmission Industry Section: It was the right time for the self-production products replacement
“It is very important to discuss an independent alternative in such a special situation. Specifically, in the automotive automatic transmission niche, I think that there are four advantages for the self-production products replacement.” Li Shengqi, secretary-general of the China Automobile Automatic Transmission Innovation Union and the China-Europe Association Gear Transmission Industry Branch, pointed out in an exclusive interview with a reporter from China Automobile News:
- Consumer upgrades have driven the entire vehicle to a period of continuous rapid growth with automatic transmissions;
- Second, the technical quality level of autonomous car-complete enterprises has made great strides, and the market share is at a high level of about 40%, entering a period of stability and further growth.
- Third, breakthroughs have been made in the core technology of the autonomous automatic transmission assembly, and the assembly products have entered the market quickly and for a long time. China’s automobile industry has ushered in an extremely rare opportunity for historical development, and objectively has created conditions for a higher quality, pragmatic and close cooperation in the entire automobile industry chain in China;
- Fourth, the industry has nurtured a contingent of technical personnel for the integration of machine, power, liquid, control, and systems.
So, how should the road of autonomous replacement go? Li Shengqi believes that there should be three stages.
The first stage is self-development based on reference. The main task of the industry is to pay attention to the transmission assembly. Through international and domestic cooperation, the main way is to make breakthroughs in the core technology of the assembly and it’s market Key components and core components companies start their research and development. We have achieved the objectives set for this stage;
Stage 2. At this time, the industry has learned about key components and core components and can innovate according to the development requirements of the whole vehicle. Even Japan and Korea, which are now advanced in the automobile industry, have made a solid step by step from this stage. We may need three to five years to complete this stage.
The third stage is self-reliance. The COVID-19 is an external rigid constraint that cannot be changed. Previously, we did not have much sense of urgency and crisis, and we could not reach an industrial consensus. So, the industry did not form a joint force, and it was very difficult to produce good results. However, the uncertainty of the global epidemic today may lead to price increases or even production stoppages for certain products, which serve as a catalyst and will accelerate the process of autonomous substitution.
In the second stage, we should have achieved a lot of results through three to five years of step by step work. On the whole, 2025 will be over. In the third stage, the whole industry will spend another 5 to 10 years to make the core components, which will mark china as the top-level automobile making country” Li Shengqi said.
“From a deep perspective, there is an important challenge in the replacement of parts and components, which is whether or not the market accepts them, and enterprises like to use them or not ” It is understood that although some key technologies of some domestic components have great breakthroughs, the industrialization process is slow. In his work, Li Shengqi has exchanged views with the technical team of domestic car-complete enterprises several times to find out what has prevented the car-complete enterprises from adopting the core components developed by local Chinese enterprises. “They are mainly concerned about four issues — maturity of technology and reliability of products; competitiveness of costs; assurance of delivery; and elimination of risk if quality problems occur. China’s local parts suppliers cannot avoid these critical issues. Only by resolving these four concerns, then we would truly replace imported auto parts with China’s own automotive parts and components.” He believed that the epidemic has further profoundly recognized the “symbiotic and indivisible” nature of auto parts supply chains, and therefore concerted innovation and inclusive development are necessary.
“It must be common progress, and all sides should work together to fill the gap. The industry should also be prepared to share the risks and allow for imperfect and less mature situations at an early stage. Such a consensus is very important.” Li Shengqi called: “The independent replacement requires more vigorous efforts, supported by a more deep and refined strong-base project, which requires an organic integration between the state innovation system and the industrial innovation system and mutual promotion.
Therefore, under the guidance of the national innovation strategy, systematic reconstruction of industry research institutions is an important part of establishing an innovative country.