Nearly 100 suppliers compete for 30 billion orders

More than 70 companies are lining up for opportunities. Stimulated by the expansion signal from Shenlong Motors, over 70 domestic and foreign small and medium-sized auto parts enterprises have registered to build factories in Wuhan Economic and Technological Development Zone, creating a bustling scene that has been ongoing for several months. To gain access to Shenlong’s 30 billion yuan strategic supplier list, high-level manufacturers from both within and outside China, including major multinational component suppliers, have made frequent visits to Wuhan. “Companies like Visteon, Faurecia, Lear, and Stilton have sent senior executives to Shenlong and have clearly expressed their intentions to invest or expand their operations,” said Ning Xiaoyang, head of procurement at Shenlong, on September 21. With the layout of the Wuhan Development Zone now largely complete, land availability has become limited. To address this, Wuhan City has transferred 102 square kilometers of land in Junshan Street, Caidian District, to the Development Zone for management, helping to ease the pressure on enterprise land supply. According to Shenlong’s capacity planning, annual production is expected to rise from 300,000 to 500,000 units by 2010, with spare parts purchases increasing from 15 billion to 30 billion yuan. Currently, Shenlong sources nearly 10,000 types of auto parts and industrial products annually, working with over 300 major auto parts suppliers and nearly 500 industrial product suppliers. To support this growth, Shenlong has decided to establish a global procurement and supply system, forming strategic partnerships with stronger suppliers and building two large industrial parks in Wuhan and Xiangfan. New standards set by Shenlong require strategic suppliers to meet long-term development needs, offering top-tier quality, global competitiveness, and the ability to quickly supply new products. Additionally, suppliers must possess core technologies and maintain a competitive edge in production and quality over time. Valeo, one of the world's top ten auto parts suppliers with annual sales exceeding 10 billion euros, has been operating in the Wuhan Development Zone since 1995, manufacturing headlights for Shenlong. “Our 3,600-square-meter extension plant is almost complete, using globally synchronized equipment,” said the general manager of Valeo Lighting Co., Ltd. In early 2007, the company invested an additional 100 million yuan in the second phase of the project, anticipating the upcoming expansion of Shenlong. Dongfeng Visteon, a joint venture between Dongfeng Group, SAIC Group, and Visteon USA, is the main manufacturer of dashboards and interior/exterior trim parts for Shenlong. Established in the Wuhan Development Zone in 2003, the company had annual sales of 400 million yuan, with 250 million yuan coming from Shenlong. As a key player, it is also preparing for expansion. However, not all suppliers will benefit from the growth. According to PSA’s dual-brand strategy, Shenlong plans to launch 12 new models by the end of 2010, with 3–4 models each year. Despite the growth, Shenlong’s long-standing weaknesses have become apparent: insufficient localization of spare parts supply and persistently high logistics costs. Moreover, many local strategic suppliers lack strong independent R&D capabilities and effective management. Data shows that in 2006, Wuhan’s total automobile output value reached 42.7 billion yuan, with 31.5 billion yuan from vehicles and 10.5 billion yuan from parts. Last year, automakers issued 15 billion yuan in orders for parts, but only 4 billion yuan were sourced locally. Companies like Shenlong often had to look to Jiangsu and Zhejiang for parts. Thus, cultivating strong local suppliers has become a top priority. Ning Xiaoyang also pointed out that existing suppliers face issues such as low production efficiency and poor synchronization with new model development. “If parts cannot keep up with future French model launches, many suppliers may struggle to secure new orders.” Industry insiders note that Chinese auto parts companies still lag behind international giants in R&D capabilities, production capacity, and corporate management. As a result, multinational auto parts giants are gaining an upper hand in this competitive landscape.

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