Three German car parts suppliers have been told by China that they can no longer manage their Chinese units independently but need to form partnerships with local peers, the chief executive of auto parts maker ElringKlinger told a German newspaper.
Such a decision, if substantiated, would fit with an increasingly tough stance adopted by China’s competition regulator, the National Development and Reform Commission (NDRC), towards the foreign car industry.
It recently began to investigate foreign carmakers following complaints that they were overcharging Chinese customers.
“The Chinese state has told several (German car) suppliers that they are no longer allowed to operate their Chinese subsidiaries on their own but only as part of a joint venture in the future,” ElringKlinger’s Stefan Wolf was quoted as saying in the Monday edition of Stuttgarter Zeitung.
Wolf says he knew of three companies that now needed to look for a Chinese partner, but did not name them. He says ElringKlinger had not been affected for now.
“If that were to happen, it would be an attack on intellectual property. 50% of the company is being taken away — this, effectively, is expropriation,” says Wolf.
The companies targeted tend to have expertise in key technologies, Wolf told the paper, adding that ElringKlinger had already transferred a lot of know-how to its Chinese division.
“I believe this is an attempt to catch up on know-how and innovation,” he told the paper.
German automakers targeted
Foreign manufactures such as Volkswagen and Daimler are obliged to form joint ventures in China, but several overseas component makers have not been subject to the same requirements.
Those companies have expanded their operations in China, the world’s largest auto market, and grabbed a bigger part of the industry’s value chain as car manufacturers cut back on research and development to keep down fixed costs.
In 2012, suppliers spent 37 billion euros ($49 billion) on research and development, equivalent to 69% of global automotive research and development spending, according to consulting firm Oliver Wyman.
As a result, their share of overall value creation in the automotive industry is expected to rise to 81% by 2025 from 77.3% in 2012, according to the firm.
German automotive parts maker Robert Bosch GmbH’s China unit says it has not received any notification from Chinese authorities with regard to changes of foreign investment policies related to the automotive component industry.
“We believe that foreign investment will continue to play a vital role in China’s economic development and foresee (an) improving investment environment of fairness and open competition in China,” Bosch says in a statement. Bosch already has some joint ventures in China.
Continental says it had received no requests from the Chinese authorities to form joint ventures. The China units of U.S. engine maker Cummins and France’s Faurecia SA said they were unaware of any policy changes.
A spokesman for automotive cable and wiring systems supplier Leoni AG says it too was unaware of a current request, but acknowledged that Chinese authorities had been in touch about forming a joint venture in the past.
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