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Led by China, multinational suppliers acting more like Chinese companies

At Auto Shanghai 2019 last month, I talked to quite a few global CEOs of multinational suppliers.

My interview with two of them – Continental CEO Dr. Elmar Degenhart and Hella CEO Dr. Rolf Breidenbach – are featured in this week’s issue.

The very simple fact that they, along with several of their counterparts at other major tier-1 suppliers, were in Shanghai already reflects the importance of the Chinese market. In addition to Continental and Hella, suppliers that had their global CEOs attending the show included ZF, Faurecia, Mahle, Garrett, ElringKlinger, Brose and Sensata Technologies, among others. Big names such as Bosch and Aptiv also had their global C-level executives including board members and CTOs attending.

The “in China, for the world” motto is no longer new to them. They are already preaching that.

Add one more: being Chinese.

Many of the new technologies and products on display at these suppliers’ stands in Shanghai were in fact developed right here in China by local development teams specifically catered to market requirements and customer needs in China, never before seen elsewhere in the world. These will apply first in China and then possibly be applied to the developed western markets. Dr. Degenhart calls this basic development, which will make China complete the so-called “circle of basic development” incorporating those in the U.S. and Europe, developing technologies for global markets. Hella, like many others, is forming strategic partnerships often in the form of joint ventures with key Chinese customers. Many CEOs in charge of these suppliers’ China operations are already Chinese. Case in point: the president of Bosch Powertrain China is a local Chinese and he was one doing all the talking at a media event during the show while an expatriate deputy looked on from the side, instead of the other way around as usually is the case. Bosch Powertrain is even moving the headquarters of its natural gas unit from Germany to China, because natural gas applications are much more prevalent here.

“It’s no longer a one-way road,” as Dr. Degenhart puts it.

The proportion of their business in China will continue to grow as continent for electrification, autonomous driving and connectivity continue to rise, because new technology adoption and penetration will be much faster here in China, and these multinational suppliers must come up with local solutions developed locally suitable for local customers, who in the first place embrace new technologies faster than their foreign counterparts as key measures to allure Chinese consumers.

Many Chinese brand front runners such as Geely, Great Wall, BYD and GAC depend on local solutions catered to fast changing local customer requirements, so these suppliers must act local.

In many ways, these multinational suppliers are already Chinese companies. Their CEOs in charge of China operations are local Chinese, most of their engineers are local Chinese, and they are innovating new business models the Chinese way.

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