Chang’an is moving away from price negotiations toward managing relationship with suppliers through the entire lifecycle cost of the vehicle and working with suppliers on how to work together on cost management, according to Li Xinqiang, purchasing director at Chang’an Automobile Co., Ltd.
“OEMs have always been authoritative in an OEM-supplier relationship and that relationship often lacks understanding and trust,” said Li. “There must be a coordinated relationship management.”
Chang’an has established the first supplier cost management center to allow two-way evaluation of OEM-supplier relations, according to Li, who believes that suppliers are not simply participants in OEM procurement strategies, but also constituents.
Ralf Cramer, president and CEO of Continental China, says that supplier synergy with OEMs is a global issue and in China in particular, suppliers are moving more engineering to China for local R&D to have synergies with local customers.
“Continental plans to double engineers in China in the next 5-6 years in product development,” said Cramer.
“Chinese customers are using supplier brand to advertise their cars,” said Edouard de Pirey, president of Valeo China. The Geely GC9, for example, touts the value of the Valeo headlights. “OEMs and suppliers are partners,” said de Pirey.
De Pirey says that the relationship between Tier-1/2/3 suppliers is the same and all of them must be added to the innovation process. “There are some convergence between automotive and consumer electronics and they will be source of innovation for Valeo and OEMs. They have an important role in cost reduction,” said de Pirey.
The OEM-supplier relationship should be one of “close coordination and win-win and making progress together, according to Simon Yang, president of Delphi China.
“The key is to provide value to our customers and we need to invest a certain percentage of our sales into R&D to meet that requirement,” said Yang. “We need to be where our customers are.”