Hong Kong • Chinese companies started talking a decade ago about cracking the US auto market with an array of low-cost passenger vehicles. That hasn’t happened, so instead they’re getting under the hoods of US cars by buying up parts makers at a record pace.
Ningbo Joyson Electronic Corp supplies windshield- washer and ventilation systems to some of the world’s biggest carmakers, including Ford Motor Co, General Motors Co (GM) and Volkswagen AG.
Last year, it spent more than US$1 billion (RM4.45 billion) buying a Michigan maker of air bags and an Indiana manufacturer of assembly-line equipment.
Now, it’s on track for potentially the biggest deal yet — using a subsidiary to bid for beleaguered airbag maker Takata Corp and further entrench itself in chassis sold to US drivers. The deal would continue an aggressive strategy that put Ningbo Joyson at the forefront of a record US$1.6 billion in investments in US companies by Chinese parts makers last year seeking global supply-chain access to compensate for a maturing home market.
“We’re just at the very out-set of a major trend that will run over the next five to 10 years,” said Michael Dunne, president of Hong Kong-based consultancy Dunne Automotive Ltd. “If the original game plan was to export from China, now it’s clear that they will be expected to invest and create jobs in the US.”
There were at least seven announced auto-related deals in the US involving Chinese companies last year, with the total announced value eclipsing the previous record set in 2014, according to data compiled by Bloomberg.
The largest was Joyson’s US$920 million purchase of Key Safety Systems Inc, a maker of airbag modules with US factories in Alabama, Florida and Tennessee. The company has about 13,000 employees in 14 countries.
The Sterling Heights, Michigan-based company declined to comment.
Key Safety now is the preferred bidder for Tokyo-based Takata, which agreed to pay US$1 billion to US regulators, consumers and carmakers after its faulty air bags were linked to at least 17 deaths worldwide. Still, the US is Takata’s biggest market, accounting for about 41% of its revenue in the fiscal year ended March 2016.
Takata is aiming to sign an agreement with the successful bidder by early March, according to people familiar with the matter who asked not to be identified because the discussions are private.
Last year’s deals also include Tibet Yinyi Investment Management Co buying ARC Automotive Inc, a manufacturer of air-bag inflators from Knoxville, Tennessee, for US$491.2 million, according to data compiled by Bloomberg. On Dec 30, ZYNP Corp of Mengzhou, China, announced it was acquiring powertrain maker Incodel Holding LLC in Michigan for US$101.2 million.
“Chinese companies have built up good relationships with major global automakers in China, so it’s quite natural for them to expand overseas,” said Michael Yu, a Deloitte China partner in Shanghai.
The spending could help Chinese companies gain foot-holds in the US at a time of simmering tensions between the two nations. President Donald Trump is threatening tariffs on Chinese-made products, and he triggered a spat with China’s government by speaking with Taiwan’s president.
The Chinese also failed to deliver on proclamations dating to 2005 to sell their own brands in US showrooms, as the Japanese and Koreans did with Toyotas and Hyundais. The latest plan comes from Guangzhou Automobile Group Co, which will open a US research-and-development centre this year and export cars to American showrooms as early as 2018, president Feng Xingya said. Shares reached a 52-week high in Hong Kong yesterday, and they have gained 38% this year.
The Chinese also are seed- ing their own US operations. Qingdao Sentury Tire Co agreed in September to invest US$530 million in a new factory in LaGrange, Georgia, according to a statement by the Chinese company’s US subsidiary. The plant is set to open next year with more than 1,000 employees.
Fuyao Glass Industry Group Co, a manufacturer from Fujian province that supplies Ford, GM and Toyota, is spending US$1 billion to expand in the US, a company spokesman said on Feb 10. The investments include factories in Moraine, Ohio, and Mount Zion, Illinois.
The manufacturers are looking abroad to help reduce their dependence on China. The world’s second-largest economy is slowing, with gross domestic product likely to grow 6.5% this year, Bloomberg economist surveys show. That would be the lowest since 1990, according to data compiled by Bloomberg.
Auto sales growth will retreat to 5% this year from almost 14% last year, after the government scaled back a tax cut and economic growth weakens, according to the China Association of Automobile Manufacturers. Major cities imposed ownership restrictions to ease traffic congestion, and President Xi Jinping’s government is trying to find ways to combat the choking smog plaguing the nation. — Bloomberg