Sourcing parts in China challenges AVL

BEIJING -- Jiang Hong is director of sales in China for AVL List GmbH. AVL designs engines and provides testing technology to Chinese and foreign automakers in China. Privately owned AVL expects its 2006 China revenue to grow by about 10 percent on 2005 revenue of about 57 million euros, or about $71.5 million at current exchange rates.Local companies still have far to go when it comes to components requiring lots of experience or high technology, he says. Jiang spoke to China Bureau Chief Alysha Webb about Chinese suppliers' maturity level.What can engine manufacturers source from China?They can source (mechanical parts such as) engine blocks, pistons and crankshafts, and some electronic stuff. But for key electronic components such as engine management systems, the major suppliers are all foreign-invested. I don't think any local supplier has the capability (to manufacture engine management systems).For mechanical stuff such as an engine block, the most critical part is casting. There are a lot of local suppliers that have good quality casting. But for special materials, such as an aluminum block, I would say that joint ventures have a good advantage.If you want to have good quality, you buy from joint ventures, or even import.Why?Aluminum blocks require a lot of experience and special know-how that local suppliers haven't accumulated. It is a new technology, so they haven't had the chance to develop that capability. For aluminum blocks, you also need a huge investment.For electronics such as engine management, you need software and special hardware. The local supplier doesn't have the technical capability, and their joint-venture partners don't share it with them.Some local suppliers have tried to build up their own engine management systems for 20 years, but none of them can provide products that are ready to run in the market. They aren't mature products.Why haven't Chinese suppliers been able to reach that maturity level?For Western countries, engine management systems are also new. They only started being used from 1970. It is a step-by-step process. By investment and experience it was developed.Compare the quality of the domestic companies and companies in the United States and Europe.If we are talking vehicles, for the interior, domestic companies are doing quite well. But when you come to the powertrain side, (where) the components need a lot of technological know-how, the local supplier quality still needs between five to 10 years (to reach international standards).I do see some positive developments, though. Some (domestic consumer) electronics manufacturers now have turned to automotive electronics. I would say with their know-how about computer electronics, their chances are good.What's your assessment of the local supplier base?For simple components such as a water pump, which is mechanical, local companies can do well. (But) when you change the specifications, quite a few of the local suppliers are not capable (of meeting the new specs). The manufacturing skill is very high, but they lack engineering knowledge.Within the last 10 to 15 years, though, they have really changed a lot. Step by step, they will develop the abilities.I do see signs of success. In Japan before, only companies from Europe or the United States provided engine management systems. Later (Japanese companies such as) Hitachi and Denso did a good job. Their engine management systems compared (well) to the European and United States suppliers'. Gradually, with the electronics companies' involvement, this will occur in China. You may e-mail Alysha Webb at alyshawebb@yahoo.com

Sourcing parts in China challenges AVL

Featured Stories