Dr. Beiting Lin, the Regional Chairman and CEO of DaimlerChrysler for Northeast Asia, recently spoke with reporters in Beijing, revealing that the company plans to significantly increase its procurement of auto parts from China in the next two years, aiming to localize more of its production. In 2008, DaimlerChrysler is expected to spend approximately $840 million on Chinese auto parts, which translates to about $6.7 billion in total purchases over several years. This means that the company will be making around $8 million worth of local purchases annually, a significant step toward greater localization.
These locally sourced parts will be used in the production of joint ventures in China, including both Mercedes-Benz and Chrysler models. Dr. Lin emphasized that the company will strictly comply with China’s “Regulations on the Administration of Imports of Auto Parts That Constitute the Characteristics of Complete Vehicles†and other relevant policies, ensuring that all operations are in line with local regulations.
This move highlights DaimlerChrysler’s long-term commitment to the Chinese market and signals an acceleration in the localization process of Beijing Benz. As global premium car brands continue to establish their roots in China, the country is becoming a crucial hub for automotive innovation and production.
The journey of joint ventures in China's auto industry has evolved from initial collaborations to mid-to-high-end models like Mercedes-Benz and other top-tier international brands. Over time, the technological and capital scale of these joint ventures have advanced significantly. However, this path hasn’t been without challenges. The complex interplay of interests between partners has led to some setbacks, where certain Chinese companies lost control of their joint ventures, while foreign firms faced similar difficulties.
In recent years, there has been much debate about how automakers should approach joint ventures. Now, as major players like DaimlerChrysler and BMW take concrete steps in China, it seems unlikely that they will follow the "Brazilian model." With strict regulations such as the “Auto Parts Import and Export Management Measures†in place, "pseudo-localized" vehicles no longer have a clear market. Instead, globally synchronized high-end models based on advanced platforms are being introduced rapidly, creating excellent opportunities for the domestic auto parts industry.
Industry insiders have pointed out that the most profitable parts companies in China are not necessarily domestic brands. Rather, they are often foreign-owned companies that dominate the market. These foreign automakers quickly seize profit opportunities by bringing their own parts suppliers into China, often forcing local suppliers to keep up with new model launches. This has created significant pressure on the domestic auto parts sector.
However, the challenges faced by China’s auto parts industry are deeply rooted in its weak foundation, low technological level, and fragmented scale. While moving the production of globally competitive models to China is already difficult, achieving real localization of key components and maintaining high-quality standards is even more challenging.
Dr. Lin also noted that the high-end positioning of Mercedes-Benz limits its production volume, making it difficult to rely solely on local suppliers. This issue is not unique—BMW previously faced similar challenges. One solution is to encourage suppliers to improve their quality and strive to join the global supply chain of Mercedes-Benz and BMW.
Currently, companies like Chery, FAW, SAIC, and Dongfeng are focusing on independent R&D of passenger vehicles. But the competitiveness of the vehicle companies depends heavily on the strength of their supporting parts suppliers. Therefore, domestic parts manufacturers should seize this opportunity, provide components for joint ventures, and enhance their overall capabilities. By building strong alliances and investing in independent research and development, they can lay a solid foundation for the future growth of Chinese brands.
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