Japanese Automakers Have to Rely on China-Made Auto Parts image

Japanese automakers plan to increase their reliance on China-made auto parts to cut production costs in the country.

As competition in China became tougher Japanese automaker are not able to keep pace with the local manufacturers such as Geely. As more and more customers turn to the dub-$10,000, no-frills vehicles, this segment has become a real battleground for the automakers, as analysts predict it will increase 40% in the following two years.

The Japanese automaker entered China a decade ago, importing parts from their home country. Now, to cut costs and become more competitive they urged suppliers to transfer production to China. Nissan and Honda said that more than 90% of their auto parts are built locally, even if they are more expensive compared with those produced by Chinese manufacturers, as they still rely on materials brought from Japan.

As the yen has become firmer and the tensions between the two nations have been lightened up, Japanese automakers are under pressure to source more parts from Chinese suppliers. As the no-frills segment is dominated by Geely’s King Kong and GM’s Chevrolet Sail, Japanese automakers have to keep costs as low as possible and increase their sourcing of locally produced parts.

“No matter how you look at it, pure Chinese suppliers are cheaper,” said Shouhei Yamazaki, senior vice president for purchasing at Nissan’s local joint venture, Dongfeng Nissan Passenger Vehicle.

Source: Reuters