The practice of Chinese auto parts producers “migrating” their factories to Vietnam and Indonesia

Chinese auto parts manufacturers face growing pressure from foreign customers to set up factories outside the country. Especially 3 years of shining performance Covid-19 makes businesses “wary” about relying too much on China.

For the first time in about 25 years, China is not the top three investment priorities for most American companies, according to a survey by the American Chamber of Commerce in China. The survey also found that the percentage of companies moving their supply chains elsewhere or considering doing so has almost doubled from a year ago. Photo: Reuters.

Currently, carmakers from Europe and elsewhere are holding direct talks with manufacturers of everything from cooling parts to power systems, according to several suppliers interviewed. brake systems and car chargers, urging them to set up factories in places like Vietnam and Indonesia so they can still benefit from the expertise and long-term relationships but avoid the risks posed by China Present.

While some international names like Airbus SE and Tesla Inc. are contributing twice as much to Asia’s largest economy, the shift is a growing threat to China’s status as the world’s factory and its bid to win back global business confidence.

Wang, a manager of a company specializing in the production of electric vehicle charger components based in Jiangsu, said the pressure was obvious. When an important European customer visited for the first time after China lifted Covid restrictions, the first thing the customer asked was the company’s plan to set up an overseas factory and expressed concern. on rising tensions between China and the West.

On a taxi ride from the airport to the factory, Wang and his client agreed to visit Vietnam and Thailand to look for opportunities. “I don’t even like flying,” Wang said. He only asked to reveal his last name so as not to reveal the identity of the business or the customer. “But it seems I have no other choice. Move abroad or lose your business.”

It’s not just auto parts makers that feel the pressure of the so-called China+1: the push to set up at least one factory outside of China’s headquarters. Most notably, Apple Inc. and its suppliers are moving production out of the country of billions of people.

Foxconn Technology Group plans to invest about $700 million in a new factory to make iPhone components in India, while AirPods maker GoerTek Inc. is investing $280 million initially in a new facility in Vietnam and considering expansion in India.

“Companies are moving from a cost-based strategy to a resilience-based strategy,” said Ben Simpfendorfer, a partner at consulting firm Oliver Wyman based in Hong Kong. Resilience is by adding one more plant or more in another part of the world. The pandemic and trade tensions have made the fragility of global supply chains more apparent.”

China’s Sunrise Elc Technology, which supplies electrical components to German auto parts maker Robert Bosch GmbH, and Panasonic Holdings Corp. of Japan, established a factory in Vietnam to manufacture digital signal set-top boxes for the foreign consumer market. In addition to accelerating plans to obtain relevant certifications to manufacture auto parts at the Vietnamese factory, the company is also looking for locations in Europe and the US.

Automakers from Europe and elsewhere are pressing Chinese auto parts makers to set up factories in places like Vietnam and Indonesia. Photo: AFP.

Sunrise’s chief marketing officer, Timothy Huang, said the overseas expansion was mainly driven by the “rapidly changing international situation”, specifically referring to trade and political tensions. China’s rule with the US. Huang said in an interview from his office in Shanghai that some of the policies taken during the trade war, such as raising tariffs on a variety of Chinese goods, have now become the norm. chemical.

“What happened to consumer electronics is likely to repeat itself in the automotive production chain,” he said. Especially after Covid and the closure of key production centers have crippled the supply chain.”

Minth Group Ltd., which manufactures body structural components along with trim and interior trim parts, last year signed an agreement with Renault SA to form a joint venture to manufacture battery boxes in a factory in Ruitz, France, and broke ground on a project. The factory in Poland will operate with Sanhua Holding Group Co. These companies add to factories in Thailand, Germany, Serbia, the Czech Republic, the UK, Mexico, and the US.

Liu Yanchun, chief executive officer of Minth, said at an event in Shanghai this past February: “We have all seen some recent reversals in globalization trends. Other factors behind the change include growing restrictions on Chinese exports introduced by President Joe Biden’s Inflation Reduction Act aimed at reducing reliance on Chinese raw materials. especially electric cars. US automakers are also prioritizing more local suppliers, and customers are demanding faster response times to fulfill orders.”

By expanding production facilities around the world, Liu said Minth will better respond to customer needs and geopolitical risks such as trade tensions or an outbreak of war.

“We will have many cards to play and will never be shown all the cards,” emphasized Liu Yanchun.

Source: VN Economy