DETROIT (June 11, 1:05 p.m. ET) — Global suppliers, attracted by stunning growth prospects, are shrugging off this year's slowdown in auto sales in China and investing heavily in the world's largest auto market.
Continental AG, for instance, plans to hire 5,000 workers in China by year end. It has 16,000 now.
Magna International Inc., too, is all in. In 2014, the company plans to operate 28 plants in China, eight more than now. In 2001, Magna had just one plant in the country.
In a global industry still recovering from the Great Recession, China offers near-certain prospects for robust growth.
Because a growing number of autos are built on global platforms, suppliers can gear up swiftly in China by producing the same parts that they make elsewhere.
But suppliers must be nimble, for example, to work with powerful government officials in China and help domestic automakers fill gaps in engineering expertise.
China's central government decreed in the first quarter that government officials must buy vehicles from domestic automakers. That's bad news for Audi, the brand of choice for officials, but possibly good news for suppliers, such as Magna and Johnson Controls Inc., that can provide elaborate rear seating areas preferred by chauffeur-driven officials.
Growth in China highlighted a good 2011 for suppliers. In the Automotive News list of the top 100 global suppliers, 68 posted double-digit gains from 2010, driven in part by North America's rebound from the recession. The only troubled group in the top 100 was Japanese suppliers, who endured a slump caused by the March 11 earthquake.
Growth projections in China are compelling. Analysts and industry executives expect light-vehicle sales to reach 30 million by 2020, more than double the 14.5 million sold in 2011.
In other words, in eight years China's auto market is tracking to match the size of today's European and U.S. markets combined.
As they plan ahead, the suppliers are unmoved by the sales slowdown in China. In the first four months of this year, sales of passenger vehicles rose just 2 percent, according to the China Association of Automobile Manufacturers.
Johnson Controls Power Solutions, which produces lead-acid and lithium ion batteries, is investing more than $1 billion to boost manufacturing capacity in China.
It expects to produce about 17 million batteries this year and as many as 30 million in 2017 — about 70 percent for the aftermarket and 30 percent for automakers. None of the batteries will be exported, the company says.
Kim Metcalf-Kupres, vice president of global strategy for the unit of parent JCI, predicts China in 2020 will be the largest market for auto batteries, and thus her company's largest opportunity. North America is the largest market now.
JCI also produces seats, complete interiors, interior electronics and other parts.
Metcalf-Kupres says domestic automakers typically need little engineering assistance to adapt standard lead-acid batteries to their vehicles.
But it's a different story for fuel-saving stop-start technology, in which advanced lead-acid batteries, called absorbed glass-mat batteries, work with sensors and other devices to stop the engine, say, at stoplights.
Johnson Controls engineers typically work closely with engineers at Chinese domestic automakers in China to integrate the technology into their cars, Metcalf-Kupres said.
Soft buttons for China
Magna, No. 4 on Automotive News' global list of top 100 suppliers, expects its sales in China to double from last year to about $1.5 billion in 2014. Magna produces a vast range of parts, including seats, body and chassis parts, electronics, and electric systems.
Chinese consumers are increasingly aware of — and want — the advanced technology that automakers are lavishing on autos sold in Europe and the United States. But Chinese shoppers still have preferences, and global suppliers operate many technical centers there to modify global autos for local tastes.
For instance, Germans prefer hard and precise-feeling buttons and controls, while Chinese prefer soft buttons, says Frank O'Brien, executive vice president of Magna's Asia Pacific region.
For the complete version of this story, see www.autonews.com.