A decade ago, when US vehicle sales volume was significantly larger than in China, European suppliers with North American plants shipped components from there to China.
Now, increasingly, parts are going the other way. For certain high volume global platforms with acceptable costs, notably for General Motors platforms, the production base is in China.
Suppliers are producing there because it makes little sense to manufacture parts in substantial volumes in both locations.
It's all part of the gravitational pull of China for global suppliers – not exactly news, except that the trend has recently gathered new momentum.
If the third quarter financial results of North American and European suppliers suggest one thing it is this: China is hot again – and, in fact, has never really cooled off.
The US auto industry is expected to level off at about 16 million units in 2014, which is only one reason why global parts makers are intensifying their attention on China – as though it was 2009 or 2010 all over again.
Those warnings about over-enthusing about China are being set aside for the moment. Chinese sales are up 15% this year and taking North American and European suppliers along for the ride.
The suppliers' footprints in China are reaching massive proportions.
Continental already has 19 factories and nine Research and Development facilities in the country. It makes chassis parts, engine components, electronics and tires in China.
Faurecia has 39 plants and four R&D centres in China.
Valeo now has 22 factories in the country that make powertrain components, driver assistance systems and cooling and heating systems. And the French supplier has 10 product development centres and three research centres in the country.
China was an important subtext of the recent round of third quarter financial reports.
Valeo's China sales jumped 24% to €319 million in the third quarter.Continental’s sales in the country have been growing twice as fast as its global sales. Because of substantial investment in the country, Ralf Cramer, president of Continental China, told Automotive News China that the company’s revenue in China will expand more than 15% this year.
Magna, North America's largest supplier, turned heads when it said expects its sales in China to rise to $4 billion by 2020. That is more than a four-fold increase from revenue being counted on for this year in the country. And this from a company that had a notably slow start in the country. Magna's business in China this year will come near to reaching $1 billion, compared to $800 million in 2012.
Tenneco said sales from its ride performance division increased 7% to $635 million, mostly due to robust light-vehicle production in China.
Faurecia's sales in China climbed 26% in the third quarter. That's on top of a 25% rise last year to €1.1 billion.
BorgWarner said Asia will be the source of nearly half of new growth by 2016, with China accounting for about one-third of the new business. Interestingly, eight domestic Chinese automakers are among BorgWarner's top 25 customers.
Delphi CEO Rodney O’Neal said the US supplier would roughly double its revenue in China over the next five years. Sales in China in the third quarter rose 12%.
Sales in the country account for 13% of the Valeo's global automotive revenue. Through September, the French supplier's sales to OEMs in China rose 23% to nearly €1 billion.
Executives at each of the European manufacturers say they have either begun shifting parts from China to North America or are actively studying the possibility.
Meanwhile, hardly a week goes by without big new investments being announced. Getrag and partner Dongfeng Motor have begun building a dual-clutch transmission plant in Wuhan.
The plant, which will launch production in early 2016, will up to 250,000 of Getrag’s six-speed dual-clutch transmission a year for Dongfeng. Eventually the plant will produce one million transmissions per year.
Mann+Hummel says its Chinese joint-venture has opened a facility in Changchun to produce air, oil and fuel filters and other parts.
GKN recently announced plans to expand a joint-venture to allow full GKN Driveline Systems capability – including all wheel drive and eDrive components and systems. GKN Chongqing Driveshaft is investing $44 million to enlarge the Chongqing plant.
That will enable localization of CVJ System production for the many OEMs in the Chongqing area. It's a true sign of the times in China.
