Renault's procurement department has clearly identified China as a key supplier of automotive components. Their main objectives include sourcing qualified, locally-produced suppliers committed to global expansion, upgrading local subcontractors to tier-one suppliers for Renault, and executing specific procurement projects. In short, China has become a strategic hub for Renault’s auto parts supply chain.
Before my interview with Duning, I revisited the recently popular book *China Changed the World* by French journalist Eric Izralevich. In it, he writes, “Automobile is the only way to the modern market economy.†Having spent 30 years in China, Eric witnessed its transformation firsthand. He notes that for major automakers like GM, Toyota, and Renault-Nissan, “China has entered the most important event in the era of automotive civilization since the invention of the car, and it did so almost unconsciously.â€
I believe Duning, being a French expert with extensive experience in the automotive industry, would agree with this sentiment. Especially with Nissan’s success in China, he likely feels this change more deeply.
In May of this year, Renault established its Shanghai Representative Office, with Duning serving as chief representative. From the start, he invited the press for an interview, which we believe may be part of Carlos’ broader strategy for China. As Eric wrote, “In the past quarter-century, the world has changed China. Today, China is changing the world.â€
This is a historical trend, and the same applies to the automobile industry. Can the world car industry have developed so successfully without China? It’s not China saving the world, but rather a consensus among global automakers that China has become an indispensable player.
Thus, Renault isn’t just producing vehicles in China — it’s also sourcing components locally. According to Duning, Renault has begun planning to procure large-scale parts from China.
**Why Shanghai?**
Shanghai is no stranger to the French. The city boasts many French architectural landmarks and cultural relics. During this year’s Sino-French Cultural Year, France’s investment in Shanghai has reached a peak. In this context, Renault’s presence in Shanghai seems inevitable. Duning explained that the Shanghai office focuses on spare parts procurement. Renault has an annual procurement plan worth 20 billion euros for parts and components. Previously, their targets were mainly Japan, Mexico, and Canada. Now, they are turning their attention to China.
The reason is simple: many global auto parts giants have set up joint ventures in China. The quality of finished vehicles produced in China is now comparable, with some even exported. In particular, Shanghai has become a hub for China’s top-tier auto parts suppliers, functioning as a de facto production base for automotive components.
Duning’s analysis is accurate. The essence of China’s auto parts industry is concentrated in Shanghai, thanks to strict adherence to the “automotive industry policy†on localization, technology transfer, and integration. Other global automakers, such as GM and Toyota, have already established procurement centers in Shanghai.
As Marco Polo might say today, if he visited Shanghai regularly, he’d be amazed by the city’s transformation. This change is a vivid reflection of China’s economic evolution.
Duning noted that Shanghai and Paris are not far apart — changes in Shanghai can be felt in Paris. In Shanghai, one can witness the transformation of the entire Chinese automotive industry. For Renault, it’s not too late to seize these opportunities.
**Establishing Channels is Key**
Duning pointed out that China’s auto production capacity has surpassed 5 million units annually, with 3 million cars produced each year. He considers this figure conservative. According to official data, the value of China’s auto parts market, including after-market products, is expected to reach 160 billion yuan in the coming years. With the growing popularity of automobiles, the role of auto parts in the industry chain is becoming increasingly significant.
For Renault, the key to procurement in China is not just buying — it’s about building channels and networks. This is a challenging task. Renault’s procurement standards in China are international, covering raw materials, processes, quality, and scale. The quality of parts sourced from China must meet the same high standards as those from Europe.
Duning emphasized that becoming a Renault supplier requires rigorous evaluation. Low-value or hard-to-transport products are not a priority. What Renault seeks are valuable components. While China’s auto parts don’t necessarily have a cost advantage — due to imported machinery and higher labor costs — there is great potential in scaling up production.
**Integration of China’s Auto Industry**
Duning shared that China’s auto parts exports are expected to reach $10 billion in 2006, surpassing the $3–$3.5 billion exports from Japan, Mexico, and Canada. He believes that China’s auto parts exports will soon become a more significant market than vehicle exports.
With over 30 years at Renault, Duning recognizes China as a rising force in the global auto parts industry. Last year, China’s car production exceeded 20 million units, and this year it will continue to grow. By 2010, it’s expected to surpass 8 million units. This highlights the importance of auto parts as the backbone of the industry.
Selecting Chinese suppliers as partners is both a strategic move and an opportunity for Chinese companies to access the global market through Renault’s platform.
Renault produces 2.5 million vehicles annually, supported by 6,505 suppliers, including 577 auto parts suppliers. When asked what it means for Renault to source parts from China, Duning said, “It’s based on the growth of China’s parts industry and regional development. Integrating Chinese auto parts is similar to how China’s economy is shaping the global landscape — it’s a trend.â€
He admitted he may not fully understand the company’s big decisions, but he’s confident in China’s potential, especially in companies with foreign investment backgrounds that are already recognized globally.
In summary, Renault sees China as a critical supplier, and the future of the auto industry will be shaped by competition in this market. As General Manager Wagner predicted, “The competition in China will determine the next leader in the global auto industry.â€
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