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Auto Parts Sales Enter Fast Lane

The world's leading automotive components supplier Delphi said last week that its consolidated sales on the Chinese mainland surged by 50 percent to US$650 million last year.

The Detroit-based firm said its growth rate in China increased from 35 percent in 2002.

Last year's strong sales did not include Delphi's exports from its China operation to the other parts of its global operations according to the US corporate accounting regulations, said Chen Jinya, president of Delphi Automotive Systems (China) Holding Co Ltd.

Sales generated by Delphi's two joint ventures in China, in which the New York-listed company holds minority stakes, were also not included, in line with the New York Stock Exchange rules, Chen said.

Delphi has invested more than US$450 million and runs 10 manufacturing facilities in China, including eight joint ventures with local partners and two wholly-owned subsidiaries.

"We expect Delphi's leading position and positive growth in the China market to continue," Chen said.

"Our customers increasingly want world-class local technical support to make their vehicles more competitive in China's market.

Only by introducing more first-rate technologies, driving research and development (R&D) capability in China and providing excellent value and service to them, can we meet their expectations and maintain our leading role," he added.

Last month, the company started to build its first R&D center in China, the Delphi China Technical Center Co, with a total investment of US$50 million.

The center, based in China's economic dynamo of Shanghai, will begin operations in June next year with 500 employees.

The center will develop components and support application and systems engineering for local and overseas customers.

"China is more than a simple manufacturing or export center and it is capable of becoming a global engineering center. We will help China make this a reality," Chen said.

Delphi China will increase its exports to Europe and the United States, although it will continue to depend mainly on the fast-growing local market, he said.

"Exports will help maintain our products made in China at international levels and minimize the potential impact of market changes in China on our local business in the future," he told China Daily.

"China's vehicle market will continue to grow rapidly in the years to come, but it is hard to say what the long term outlook will be," he said.

Delphi China reported "robust growth" last year from US$147 million in 2002 in its exports to Europe and the US, he said.

Delphi will also expand its sourcing in China, following many other multinationals, he said.

China's ability in sourcing plays a significant role in Delphi's global supply strategy, he added.

Other major players in auto component production are also accelerating their efforts in China to cash in on the booming vehicle market.

Germany firm Bosch signed a contract last month to establish a fuel injector system joint venture with Weifu High Technology Co, a domestically listed components maker based in Wuxi, in East China's Jiangsu Province.

Bosch and Weifu will control 67 and 33 per cent stakes in the joint venture respectively.

US-based Visteon moved its Asia-Pacific headquarters to Shanghai from Japan, sending a strong message that it is considerably increasing its capacity in China.

China's domestic auto components industry remains too fragmented and weak to independently support fast-growing vehicle production.

There are more than 4,000 component manufacturers in China, most of which are small and low-level players.

The Chinese Government plans to form some "internationally competitive" major groups over the next few years, with the consolidation of local components producers.

(China Daily January 20, 2004)




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