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 broader context of the automotive parts industry, the project has drawn considerable attention due to its key stakeholders: Yanfeng Visteon Shanghai Co., Ltd. and Dongfeng Electronic Technology Corporation, which are affiliated with SAIC and Dongfeng. For SAIC and Dongfeng, this partnership marks their first official attempt at sharing parts and components across their respective networks.
This initiative is not the first of its kind 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, also opened its doors. However, Dongfeng Visteon represents a more advanced step in component sharing, as it goes beyond just integration—it reflects a strategic move toward standardized parts across platforms. In contrast, VW Transmission was more about consolidating Volkswagen's operations in China.
The motivation behind these developments likely stems from market pressures. After China joined the WTO, foreign automakers began to establish a strong presence in the domestic market, causing the public car sector's market share to drop from over 53% to below 40% by 2002. To remain competitive, cost reduction became essential. With parts and components accounting for over 60% of vehicle manufacturing costs, the lack of economies of scale due to fragmented procurement systems led to higher prices and inefficiencies.
Gearboxes, being high-tech and critical components, were a natural starting point for integration. Volkswagen, for example, had previously localized transmissions separately within its FAW-Volkswagen and Shanghai-Volkswagen subsidiaries. Now, with more models and shorter product life cycles, shared platforms and common parts have become increasingly necessary.
Dongfeng, which has been expanding its partnerships with Nissan, Honda, and PSA Citroen, plans to launch new production lines for cars, SUVs, and trucks. This expansion requires a more robust and efficient supply chain of parts. By bringing in SAIC’s Yanfeng Visteon, Dongfeng Visteon aims to leverage SAIC’s strengths in spare parts and enhance overall efficiency.
According to Feng Fei, vice minister of the Industrial Economics Research Department at the State Council’s Development Research Center, global trends are pushing for greater standardization in parts and components. He believes that more models will soon share a single procurement platform, aiming to increase part versatility and reduce development costs. This approach helps companies respond to diverse regional demands while maintaining cost control.
Such a shift is also reshaping the organizational structure of automotive suppliers. Previously, parts companies served only one manufacturer, but now they are adapting to serve multiple global clients. Non-core functions are being externalized, leading to a more networked and collaborative industry model.
As globalization accelerates, it becomes increasingly challenging for national industries to maintain full independence. The entry of multinational companies is driving the adoption of shared parts systems, breaking down traditional supply chains. In the coming years, the three major Chinese auto groups are expected to further expand their component-sharing networks to keep pace with international competition.
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