Recently, Dongfeng Visteon, a joint venture backed by a $30 million investment, was launched in Wuhan. While this amount may not seem significant in the context of the automotive parts and components industry, the project has sparked considerable interest due to its key stakeholders—Yanfeng Visteon Shanghai Co., Ltd. and Dongfeng Electronic Technology Corporation, both affiliated with SAIC and Dongfeng. For SAIC and Dongfeng Group, this collaboration marks their first official effort to share parts and components across their respective networks. However, this is not the first instance of such cooperation among China’s three major auto groups. Earlier this year, Volkswagen Transmission (Shanghai) Co., Ltd.—a joint venture between China FAW, SAIC, and German automaker Volkswagen—was also established. Compared to that project, Dongfeng Visteon represents a more focused strategy on component sharing. The establishment of these companies reflects broader industry trends driven by market pressures.
Before and after China's accession to the WTO, as global automakers expanded into the Chinese market, the domestic auto sector's market share dropped from 53% at its peak to under 40% by the end of 2002. To remain competitive, cost reduction became essential for maintaining market presence. Despite being part of the same brand, models like Polo, Bora, Audi, and Passat were often produced using separate supply chains, leading to higher costs and less efficiency. With over 60% of a vehicle manufacturer's operating costs tied to parts procurement, decentralized demand made it hard for suppliers to achieve economies of scale. This resulted in higher production costs and, consequently, higher vehicle prices.
Gearboxes, being high-tech components, are among the most critical parts of a car. Volkswagen aimed to use this as a starting point to fully integrate its parts supply chain. Meanwhile, the Dongfeng Group has been expanding its partnerships with Nissan, Honda, and PSA Citroen, planning new production lines for cars, SUVs, and trucks. Such growth demands a more robust and flexible parts supply system. By bringing in Yanfeng Visteon Shanghai, a subsidiary of SAIC Motor, Dongfeng Visteon can leverage SAIC’s strengths in spare parts to meet rising demands.
Globalization has led to increased sharing of parts and components across the automotive industry. Feng Fei, vice minister of the Industrial Economics Research Department at the State Council's Development Research Center, notes that more models will soon share a single procurement platform. The goal is to boost the versatility of components and maximize reuse. This approach helps reduce development costs caused by frequent model changes and short product lifecycles. It also allows multinational companies to better respond to regional market differences through standardized parts.
This shift is reshaping the structure of parts suppliers. Previously, they were tied to a single automaker, but now they serve multiple global clients. Non-core functions are being outsourced, creating a networked relationship between original equipment manufacturers and suppliers. This new collaboration model supports the implementation of platform strategies, where shared components are used across different models.
Feng Fei adds that as globalization accelerates, it becomes increasingly challenging for national industries to maintain self-sufficient and competitive systems. International component sharing is breaking down traditional supply chains, especially with the growing presence of multinational firms in China. Over the past two years, global automakers have been competing with China’s top three groups, and more vehicle projects are emerging. The demand for shared components in these new ventures is becoming urgent, increasing the likelihood that the three major groups will further expand their part-sharing networks.
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