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Foreign suppliers favor fast-growing Chinese automakers
Yang Jian | 2017/7/14

SHANGHAI -- Until recently, global suppliers were reluctant to supply Chinese automakers that wanted small volumes of components at low prices.

But that¡¯s changing. Global suppliers are increasingly reliant on Chinese automakers to expand their local sales, and Chinese auto brands have emerged as the main driver of their growth. 

Two French suppliers illustrate the trend. 

Valeo SA has maintained double-digit sales growth in China, thanks largely to its Chinese clients.  In the first three months of the year, Valeo¡¯s revenue in China jumped 25 percent to 564 million euros (4.3 billion yuan). 

Chinese automakers fueled the surge. During the period, domestic automakers accounted for 40 percent of Valeo¡¯s sales in China, up from 30 percent a year earlier.

Faurecia has enjoyed similar success. Over the past two years, the company built several plants to supply Dongfeng Motor Co., Changan Automobile Co. and other Chinese automakers.

In the first quarter of 2017, Faurecia sales to Chinese automakers jumped 89 percent to 93.5 million euros. Those automakers generated 18 percent of Faurecia¡¯s total China revenue -- a share that is expected to rise to 30 percent by 2020.

Some suppliers -- such as Magna International and Cooper Standard -- are relative latecomers to China. A few years ago, their customers were nearly all global automakers. But now they are embracing new Chinese customers. 

Both companies have experienced robust sales growth in China, and both expect to double their revenues here by 2020. 

But to do so, they need Chinese customers. Magna now supplies four major Chinese carmakers -- Changan, Geely, Great Wall and Chery --while Cooper Standard sells to Geely and Great Wall. 

There are two reasons why Chinese automakers are good customers.

First, Chinese automakers are gaining market share at the expense of foreign rivals. In the first six months, sales of Chinese brands rose 4.3 percent, while overall industry sales rose only 1.6 percent.

Second, Chinese brands are upgrading technology as they move upscale. And that¡¯s a big opportunity for global suppliers.

Great Wall, for example, recently launched its first product, a crossover, under its premium brand Wey. This year, Geely will do the same for its newly created Lynk & CO brand.

Chinese automakers have been good customers in a market where global rivals like PSA Peugeot Citroen and Hyundai have been stumbling.

This will remain for years to come. And as Chinese automakers grow, foreign suppliers will cater to them.

 Pictured: Yang Jian is managing editor of Automotive News China.

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