Mainland China's Brilliance China Automotive Seeks Ties With Taiwan Auto Parts Makers

Dec 29, 2003 Ι Industry In-Focus Ι Auto Parts and Accessories Ι By , CENS
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Mainland China auto maker Brilliance China Automotive Holdings Ltd. (Brilliance China) has expressed its intent to enter cooperative agreements with Taiwan's auto-parts makers, renowned internationally for their strong capabilities in cost control and product quality.

Su Qiang, chairman of Brilliance China, says that Taiwan's auto-parts makers possess several competitive advantages that precisely suit Brilliance China's small-volume auto-production approach, including strong R&D capability, superior cost control, and excellent manufacturing techniques.

Brilliance China makes minivans and cars at a joint-venture facility set up with Shenyang Jinbei Automotive in which it holds a 51% interest. Early this year it inked an agreement with BMW to allow it to make the latter's luxury models in mainland China. The company in the past concentrated on the production of passenger/cargo minibuses, with an annual production volume of about 75,000 units, but last year stepped into production of the Zhonghua sedan, which Brilliance China claims to be the first 100%-homegrown sedan model in mainland China.

Brilliance China sold about 15,500 Zhonghua cars in the first half this year, putting it on course to meet a full-year target of 30,000 units. The firm's venture with BMW, called BMW Brilliance Automotive Ltd. And located in Shenyang, Liaoning Province, is scheduled to begin mass production of BMW's luxury 3- and 5-series models in the first half of 2004, with a targeted output of 30,000 units in the first six months of operation.

Compared with its competitors in the huge mainland China automobile market, Su says, Brilliance China's production scale is much smaller, leading to comparatively higher per unit costs. He first visited Taiwan's major auto-parts makers to exchange opinions and ideas several years ago, and was very impressed with their management experience, technical advantages, and superior cost-control capability. The chairman admits that his company is facing a serious challenge in the huge mainland China automobile market because of its lack of scale, noting that Taiwan's advantages can help it overcome these limitations.

Su praises Taiwan's auto-parts makers' strong flexibility in cost management, saying that in Taiwan there are only about 400,000 automobiles sold per year and that the island's auto makers and parts suppliers cooperate admirably well, generating solid profit margins for both sides despite the limited production volume for each car model. This, he states, is a remarkable feat in the auto-parts industry especially, which is particularly labor- and capital-intensive.

Brilliance China won the opportunity to set up the joint venture with BMW, according to Su, mainly due to the firm's young and enterprising management team, replete with individuals possessing abundant international experience. The German outfit, says Su, has also had high praise for its level of technical sophistication, top-flight employee quality at all non-management levels, and strong manufacturing capability.

In setting up cooperative ties with select auto-parts and auto makers in Taiwan, Su concludes, the latter will benefit by being able to develop the mainland market more directly and effectively, as well as gain access to the supply system of one big international auto brand today—BMW—as well as, most likely, others in future.
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