Global suppliers, attracted by stunning growth prospects, are shrugging off this year’s slowdown in auto sales in China and investing heavily in the world’s largest auto market.
Automotive News reported that Continental AG, for instance, plans to hire 5,000 workers in China by year end. It has 16,000 now.
Magna International Inc., too, is all in. In 2014, the company plans to operate 28 plants in China, eight more than now. In 2001, Magna had just one plant in the country.
In a global industry still recovering from the Great Recession, China offers near-certain prospects for robust growth.
Because a growing number of autos are built on global platforms, suppliers can gear up swiftly in China by producing the same parts that they make elsewhere.
But suppliers must be nimble to work with powerful government officials in China and help domestic automakers fill gaps in engineering expertise.
China’s central government decreed in the first quarter that government officials must buy vehicles from domestic automakers. That’s bad news for Audi, the brand of choice for officials, but possibly good news for suppliers, such as Magna and Johnson Controls Inc., that can provide elaborate rear seating areas preferred by chauffeur-driven officials.
Growth in China highlighted a good 2011 for suppliers. In the Automotive News list of the top 100 global suppliers, 68 posted double-digit gains from 2010, driven in part by North America’s rebound from the recession. The only troubled group in the top 100 was Japanese suppliers, who endured a slump caused by the March 11 earthquake.
Growth projections in China are compelling. Analysts and industry executives expect light-vehicle sales to reach 30 million by 2020, more than double the 14.5 million sold in 2011.
In other words, in eight years China’s auto market is tracking to match the size of today’s European and U.S. markets combined.
As they plan ahead, the suppliers are unmoved by the sales slowdown in China. In the first four months of this year, sales of passenger vehicles rose just 2%, according to the China Association of Automobile Manufacturers.
To read the entire article in Automotive News click here.