Six Points of View on Domestic Auto Parts Field in the First Half of 2018

Unconsciously, the year 2018 is half through. Many people are wondering where the time did time go? Based on this time point, we look back on the major events and trends in the field of auto parts in the past six months, sort out the market operation context and industry development trend, and make mid-year inventory for readers. Prosperity and decline, confusion and helplessness, integration and reconstruction, innovation and breakdown... In the first half of this year, honey and tears intertwined, wind and thunder wrapped, which constituted a glorious and dream of China's spare parts industry.

 

 

　　Different types of joint ventures emerge, Market segments are brewing

 

　　Since this year, there has been a surge of joint ventures in China's automotive parts industry. On 5th July, ChangAn Automobile and BYD signed a strategic cooperation agreement in Shenzhen to jointly establish a joint venture company with the production and sale of new energy power batteries as its main business, which illustrates the continuation of this phenomenon. Joint ventures on the spare parts, of course, can’t be separated from the "four new modernizations" of the catalytic and the trend in energy-saving and environmental protection, as well as the strong drive of the "double integral" policy.

 

　　In January, at the World Economic Forum (WEF) in 2018, Mr. Qinghong Zeng, chairman of Guangzhou Automobile Group, said that they were in consultation with battery manufacturers and planned to build a joint venture factory in Guangzhou. Almost at the same time, Shanghai Edrive and DongFeng Industry (formerly an important part of DongFeng Automobile Group Co., Ltd., restructured in October 2017) announced the establishment of a joint venture company, Dongyang Electric Drive System Co., Ltd., to carry out electric drive system, fuel cell engine system, new energy vehicle core electrical system and other projects. BHAP (Beijing Hainachuan Automotive Parts Stock Co., Ltd.) signed an agreement with Gestamp to form a joint venture "light weight" automotive parts company.

 

　　In February, Fawer Automotive Parts Co., Ltd. signed a Memorandum of Understanding with Valeo Siemens eAutomotive Germany Co., Ltd. to cooperate in the field of core components of new energy vehicle power. In March, SAIC Infineon Automotive Power Modules (Shanghai) Co., Ltd., a joint venture with 51:49 share ration between SAIC and Infineon, was officially established. In April, BHAP signed joint venture cooperation agreements with HELLA and Magna respectively. Geely and GAGC (Guangzhou Automobile Group Co., Ltd.) signed agreements with Aisin (Japan) respectively, to produce 6AT. After the agreement, DongFeng Fawer Pump Co., Ltd. will be co-financed by DongFeng Motor Parts and Fawer shares. On 21th June, ThyssenKrupp signed a joint venture agreement with Chinese partners such as Zhejiang Jingu Co., Ltd. to produce lightweight thermoforming wheels together. This is not all the cases in the field of spare parts in the first half of this year. They are only typical representatives, but it is conceivable that the market is flooding with various variables.

 

　　If we have to categorize these joint venture cases, we can include: Sino-foreign joint ventures, joint ventures between OEMS and parts company (or vehicle-based parts), and the integration of large state-owned enterprises that the industry is keen on. As a market behavior, joint ventures are indisputable, but from the perspective of the independent development of China's spare parts industry, some make us full of expectations, some are highly expected by us, and some even make us worried. With the emergence of new competitors, it is difficult to avoid changes in market segments. However, no matter how it changes, it’s eternal to improve capability of independent innovation, master key core technology, and upgrade the development of China's automotive parts industry.

 

　　Speed up GB Ⅵ Emission Standard, Layout the active distribution of new energy power

 

　　With the "ban on fuel vehicles" appearing in the development agenda of some countries and automotive enterprises, the internal combustion engine seems to encounter an unprecedented crisis, which has aroused great concern of the industry. The discussion on this topic has not stopped since this year.

 

　　But in China, the common sense is clear. On 15th January, at the” International Symposium on the Transformation and Upgrading of Power Technology for Traditional Fuel Vehicles”, Mr. Gang Wan, Vice Chairman of the CPPCC National Committee and then Minister of Science and Technology, pointed out that “Internal combustion engines will remain the main force in the automotive power market for quite a long time. It has an irreplaceable position, especially in cargo, passenger and ship transport, it plays a decisive role .”

 

　　Upgrading products to the GB Ⅵ Emission Standard has become a concerted action of the industry. Yuchai, Weichai, FAW Liberation Engine Division, Cummins, SFH, CAMC Power and other engine companies have released the product that meet the GB Ⅵ Emission Standard this year. For example, Weichai's masterpiece, the new Euro VI power assembly, includes Weichai WP10H engine, Fast AT transmission and Hande axle. The local manufacture of the three core components has been realized. Yuchai has released 14 models of GB Ⅵ Emission Standard Engines for automobiles, which is the first time that the domestic internal combustion engine industry has released a series of products that can meet the GB Ⅵ Emission Standard. Item “CA6DL3-35E6” is the first heavy-duty diesel engine launched by FAW Liberation Engine Division. It integrates EGR post-processing technology with single channel hot-end control valve, improves the uniformity of exhaust air and effectively reduces the emission of nitrogen oxides. At the 2008 Beijing Auto Show, SDEC Power exhibited four engines that meet the GB Ⅵ Emission Standard. DongFeng Cummins announced that a new generation of ISZ13 GB Ⅵ engines will be launched in 2019... 

 

　　In March and May this year, the governments of Shenzhen and Guangzhou urgently put forward plans for the implementation of GB Ⅵ light vehicles in advance, when the internal combustion engine enterprises are developing GB Ⅵ products in full swing. Disrupted rhythm for a while makes the engine and related parts suppliers a little confused, but it also sends a signal to the industry to transform and upgrade as soon as possible. 

 

Facing the increasingly fierce market competition and the increasingly stringent emission requirements, some internal combustion engine enterprises are actively developing new energy automotive power technology while speeding up the transformation and upgrading of internal combustion engines. In May, Weichai Power signed a strategic agreement with Ceres Power, a supplier of solid oxide fuel cells, to invest 20% of its shares, and plans to establish a joint venture with Ceres Power in China to cooperate fully in the field of solid oxide fuel cells. Yuchai also launched a new generation of hybrid system development and fuel cell system integration project this year. 

 

　　The upgrading of Chinese GB Ⅵ Standard is the source power of the internal combustion engine industry, and the development of new energy automotive power is the driving force of the internal combustion engine industry to move towards new life.

 

　　Foreign capital expands the advantages, while we break through self-reliance, self-improvement and cooperation

 

　　In the first half of this year, the automatic transmission industry shocked sharply and touched people's hearts.

 

　　On 2nd April, Japan Toyota, Honda, Nissan, Mazda, Mitsubishi, Suzuki, Subaru, Daihatsu, Isuzu, Nine Vehicle Enterprises jointly built the Automotive Power Transmission Technology Research Association (TRAMI) with Aisin AW, Jatco two automatic transmission enterprises.

 

　　Together with research institutes, these 11 enterprises will conduct basic and application research on transmission technology, so as to accelerate technological progress, cultivate more talents and enhance the influence of Japan's automotive transmission industry. More than 260 million yen for prophase research funding and more than 100 researchers are from the 11 enterprises mentioned above. In the future, the Japanese government may give special support.

 

　　TRAMI declared that the specific functions are as below: centered on the transmission technology, it will lead industry and academia to develop R&D cooperation around transmission technology; to enrich the research results database, to achieve the accumulation and application of technical knowledge in the driving field; to further expand the research team, and to carry out industry-academia linkage.

 

　　Japan Aisin and Jatco have dominated the global AT and CVT markets for many years. By comparison, China's automatic transmission is still in the primary stage of industrialization, and the enterprises fight alone, weak and fragmented industry. Japan's automotive parts enterprises and vehicle enterprises are united to consolidate and strengthen their competitive strength, which strongly stimulates China's automatic transmission industry.

 

　　More exciting things follow. On 24th April, Geely Auto and GAC Group signed joint venture agreements with Japan Aisin on the production and manufacture of 6AT. Aisin has unconventionally tied up two major independent brand auto enterprises, and took over the market of automatic transmission enterprises, which has aroused strong repercussions from the industry. The voice of "Who will save the automatic transmission industry" kept lasting.

 

　　Just at this time, the Chinese automatic transmission industry has received gratifying news. On 15th June, the launching ceremony of WLY CVT25 was held in Wuhu Base of Passenger Vehicle Transmission Division of Zhejiang WLY Co., Ltd. It marked WLY CVT25 was officially put on the market. Zhidong Zhang, CEO of the enterprise, said: "The upgraded product, which we are developing independently and positively, is a milestone." It is reported that WLY CVT25 will be equipped with upcoming Chery GX car. In addition, Chery also has a number of models equipped with CVT25 under development. Jian Liang, Chief Engineer of Geely Auto Power Assembly Integration Department, said on the spot: "We require WLY CVT25 to match Geely models in 2020."

 

　　WLY cooperates with Chery, an independent vehicle enterprise, on a large scale with CVT25. It is expected to "join hands" with Geely, which greatly encourages the battered automatic transmission industry. In this unavoidable market competition, only self-improvement and joint efforts are the real way out.

 

　　Achieve the rapid development through increasing the technical threshold requirement and recycling

 

　　On 13th February, the Ministry of Finance officially released “the Notice on Adjusting and Improving the Policy of Financial Subsidies for the Promotion and Application of New Energy Vehicles”, which was drafted jointly by four ministries and commissions on its official website. The new policy would "raise the technical threshold requirements", clearly proposed to encourage the application of high energy density, low energy consumption vehicles and significantly tilted subsidy funds to higher technology level vehicles. In addition, maintaining the fuel cell subsidy quota unchanged.

 

　　The impact of the new policy on the power battery industry is not small, especially the encouragement of high energy density batteries, which directly affects the development trend of ternary batteries and lithium phosphate battery enterprises. Ternary battery enterprises go a step further to consolidate their leading advantages and usher in faster development. For example, the total installed capacity of CATL Battery was 5.4 GHW from January to May of this year, accounting for 42.5% of the total installed capacity all over the country, nearly half of the country.

 

　　Not only that, enterprises such as BYD, which used to be dominated by lithium iron phosphate batteries, also turn to research, develop and produce ternary batteries. The joint venture between ChangAn Auto and BYD will focus on the power battery production, sales and other business sectors, with capacity planning according to 10GWh. In the future, ChangAn Auto and BYD will make full use of and integrate their respective advantages, make active exploration in matching power batteries with the whole vehicle, industrial application of power batteries, and jointly build a world-leading platform for the industrialization of automotive power batteries.

 

　　The new subsidy policy promotes the further improvement of power battery market concentration, and the survival of the fittest is obvious. OptimumNano, Zhuhai Yinlong and other enterprises are in trouble, one of the major factors is that the adjustment of subsidy policy has not been dealt with as early as possible.

 

　　On 26th January, the Ministry of Industry and Information, the Ministry of Science and Technology, the Ministry of Environmental Protection, the Ministry of Transportation, the Ministry of Commerce, the General Administration of Quality Supervision and Administration and the Energy Bureau jointly issued “the Interim Measures for the Management of Recycling and Utilization of Power Batteries for New Energy Vehicles”, which clearly defined the responsibilities of power battery manufacturers in terms of redesign, production and recycling, and did a good job in standardization, information disclosure and industrial collaboration, and encouraged battery manufacturers. Under the precondition of ensuring safety and controllability, the industry cooperates with the comprehensive utilization enterprises to make rational use of the waste power accumulator in multi-level and multi-purpose according to the principle of first step utilization and then recycling utilization, so as to reduce the comprehensive energy consumption, improve the efficiency of energy utilization, raise the level of comprehensive utilization and economic benefits, and ensure the environmental protection and disposal of the unusable residues.

 

　　It can be predicted that power battery manufacturers will try various stepped utilization of power batteries with vehicle enterprises and operation enterprises. For example, new energy enterprises as Pride Power and BAIC BJEV are promoting the power exchange mode in an all-round way, in order to better realize the echelon utilization of decommissioned batteries.

 

　　Development Prospect of Plug-in Hybrid is uncertain Micro Hybrid is noticed

 

　　On 8th January, the project "Key Technology and Industrialization of Low Energy Plug-in Hybrid Electric Passenger Vehicles" developed by SAIC Group was awarded the second prize of the National Science and Technology Progress Award in 2017, which is one of the few automotive projects in this year. And, it is also the first time that new energy passenger vehicle technology has won a heavyweight science and technology award.

 

　　SAIC's award-winning project is based on its plug-in hybrid system solution with "EDU Intelligent Electric Drive Transmission" as the core. Previously, the core technology in the field of plug-in hybrid technology was basically in the hands of international automotive giants. Electric drive, electronic control and battery technology are the core of new energy automotive technology. Only by fully realizing the innovation with independent intellectual property rights in the three areas, can the breakthrough of core technology be achieved. The overcoming of three-power technology and the proposal of a new product structure of plug-in hybrid system make SAIC's new energy automotive products comprehensively surpass energy efficiency, greatly improve driving performance and ensure the safety of operation. SAIC's EDU plug-in hybrid system has also become one of the three most advanced technologies in the world, which can be ranked as THS and GM VOLTEC.

 

　　In terms of policy, plug-in hybrid power is mainly affected by two policies. This year, under the "double integration" policy, plug-in hybrid electric vehicles still account for a certain proportion of new energy vehicles, which to some extent makes the layout of PHEV more active. Besides SAIC and BYD, car brands including Geely, Trumpchi, ChangAn, Hunter and HongQi have also introduced plug-in versions.

 

　　However, with the release of the draft of "Regulations on Investment Management of Automotive Industry", plug-in hybrid electric vehicles have been formally included in the ranks of fuel vehicles, rather than new energy vehicles. Once plug-in hybrid vehicles are not counted as new energy vehicles, it means that they can’t enjoy the relevant subsidy policies. How to reduce the cost has become a problem for the follow-up development of plug-in hybrid power.

 

　　Under the "double integration" policy, the Micro Hybrid line represented by 48V and P2 technology has also entered into the enterprise vision. Continental AG and Sichuan Chengfei Integration Technology Co., Ltd. (CITC) have established joint ventures through their subsidiaries to develop and produce 48V battery systems. Schaeffler's first P2 hybrid module has been put into production in Taicang Manufacturing Base, Jiangsu Province. In the future, which or what hybrid technology routes will become new "vents"? Faced with the new market and policy environment, how will enterprises make choices? All of these will become the watching focus in the field of spare parts. 

 

Market Development Return to Rational, Technology Route Step by Step

 

　　Since this year, there has been less agitation in the field of Automotive Intelligent Network (AIN) and it has begun to return to rationality. A large part of the reason is that several auto-driving accidents happened successively in Tesla and Uber, which sounded the alarm bell for the venture into the sub-area. 

 

　　In China, strong impetus at the policy level is still working. In January, the National Development and Reform Commission (NDRC) announced the "Innovative Development Strategy for Intelligent Vehicles" (draft for comments) on its website, clarifying that China's Intelligent Vehicles can be divided into three steps. 

 

　　By 2020, the technological innovation, industrial ecology, road network facilities, regulations and standards, product supervision and information security system framework of China's standard smart cars will basically be formed. The market-oriented application of mid-level and high-level intelligent vehicles has been realized, and the demonstration operation in key regions has achieved results. The construction of intelligent road traffic system has made positive progress. The coverage rate of LTE-V2X in big cities and expressways has reached to 90%. Beidou's high precision space-time service achieves full coverage. 

 

　　By 2025, China's standard smart car technology innovation, industrial ecology, road network facilities, regulatory standards, product supervision and information security system will be fully formed. The new vehicle basically realizes intellectualization, and the high-level intelligent vehicle realizes large-scale application. The new generation of vehicle wireless communication network (5G-V2X) basically meets the development needs of intelligent vehicles.

 

　　By 2035, China's standard intelligent vehicle will be well-known all over the world. It will be the first to build a powerful intelligent vehicle country and share the "safe, efficient, green and civilized" intelligent vehicle society with the whole people. 

 

　　On the other hand, BAT and many start-ups began to take a step by step development route, which the first thing is to ensure traffic safety. On 4th July, Baidu Apollo released version 3.0 of Apollo, announcing that the world's first L4 mass-produced autopilot bus, Apollo, was officially launched in mass production. Its use scenario is only on relatively closed campus roads, not open roads. 

 

　　Not only BAT, but also start-ups have a more sober understanding on the development of intelligent networking technology. For the time being, regardless of L3 and L4, it is very important to work out L0-L2. As the head of an enterprise said, "At present, the market demand for L0-L1 autopilot products is much strong, and it is a practical choice to participate in the market competition step by step." 

 

　　In addition, the related test standards of Intelligent Network Union (ITU) have been formulated orderly. Third-party scientific research institutions, including China Automotive Technology and Research Center and Suzhou Automobile Research Institute of Tsinghua University, are actively promoting the construction of ITU traffic scene library with Chinese characteristics.