In an industry often described as a "siege," both outsiders and insiders face unique challenges. According to Dong Yu, chairman of Shanxi Yixin Brake Components Co., Ltd., the auto parts sector is highly competitive, with those outside the field eager to enter and those within struggling to keep up. For Dong Yu, the pressure is immense—managing technology, quality, and operations while also staying ahead of industry trends is essential for survival.
One of his greatest challenges is dealing directly with vehicle manufacturers. With rising raw material costs and falling car prices, smaller component companies are finding it increasingly difficult to stay afloat. Many hope that major automakers will support them during tough times, but this is often just a distant dream.
Shanxi Yixin has worked hard to break into the supplier system of vehicle factories. Since the 1990s, when light truck production boomed, brake components became a critical issue. Dong Yu saw an opportunity and led his team to develop non-asbestos disc and drum brakes with improved performance. While quality was key, the final decision always rested with the automaker.
After extensive testing and public relations efforts, their products were finally accepted. This success not only required significant R&D investment but also promised substantial profits from popular models. Dong Yu felt relieved, knowing he had secured a foothold in a fiercely competitive market.
However, many others are not so lucky. As one insider noted, the relationship between Chinese parts suppliers and automakers remains largely dependent, with most relying on the "alms" of the main plant. This contrasts sharply with the collaborative, win-win relationships seen in developed countries, where OEMs and suppliers work closely together.
R&D risks are often borne entirely by suppliers, discouraging innovation and leading to low-tech, homogenized products. Meanwhile, payment delays are a common problem. Many suppliers struggle to get paid on time, sometimes waiting over a year. Some even hire former employees to help recover outstanding debts, leveraging personal connections and expertise.
At Dongfeng Motor Pump Co., Ltd., for example, about 60-70% of sales go to Dongfeng Motor. Yet, external accounts can be problematic. If a supplier can't meet demands or pay on time, they risk being dropped. This creates a cycle of instability, forcing companies to seek new markets to offset losses.
Market pressures are also growing. As car prices fall, OEMs often shift the burden to suppliers, reducing orders when sales drop. Some suppliers find themselves unable to compete, leading to closures. In Europe, the U.S., and Japan, long-term partnerships between OEMs and suppliers are more common, with mutual support and shared growth.
Yet, in China, such relationships remain rare. As one FAW Jiefang representative admitted, while a win-win model is ideal, sometimes suppliers must be let go due to financial constraints. The auto parts industry continues to face a challenging landscape, with survival requiring constant adaptation, innovation, and resilience.
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