Songuo Motors attracts upstream suppliers, and its new model targets overseas markets attracts upstream suppliers, and its new model targets overseas markets
New Energy Equipment Industrial Complex, located in Dezhou Yucheng high-tech development zone, has kept construction in a fast way. The industry cluster, covering an area of 2000 mu (Chinese measuring way, 1 mu=666.67 square meters) and with annual capacity of 230,000 will start mass production in May of 2019. This industry cluster attracted much attention from the local government and overseas potential partners.
It is notable that this industry cluster is equipped with upper-stream industries and its main suppliers are located within the Complex to provide parts for SONGUO MOTORS CO., LTD. (hereinafter referred to SONGUO motors), which is the core of this industry cluster. SONGUO exports its parts in modular system to the overseas SKD factory, and then these modular will be assembled into complete cars which will be put into local markets. This industry cluster can operate by itself from the procurement of parts to market sales and there is no much interaction with the local industries.
The landing of SONGUO motors helps Yucheng achieve its goal of investing one industry and attracting a cluster of industries. But how does the integrated complex realize the multiplication effect? Yuan Hongying, vice-principal of Shandong Academy of Social Sciences and special commentator of economic bulletin regarded that industry interaction is one factor, but the most important factor is the sound interaction between enterprise and the local government to improve the local investment environment and overall environment.
An export-oriented industry landed in Dezhou.
Back to 4th, July, National Commission of Development and Reform released Laws on Governing Motor Industry (exposure draft), which indirectly increased technical threshold of electrical vehicles，and strictly updated and documented the management on investment projects of electric vehicle companies. On 11th, July, SONGUO motors introduced two new models of electrical vehicles in high-tech zone of Dezhou.
Currently and obviously, the electrical vehicles industry is very tight, because Ministry of Industry and Information Technology suspended the applications from 27 companies producing electrical vehicles, which was universally interpreted as cutting overcapacity. However, SONGUO is irrelevant with overcapacity and it planned to increase its capacity to 230 thousand motors in one year.
What is the implication of annual capacity of 230 thousand motors? In terms of coverage, some of 27 electrical vehicles companies with their applications being suspended cover a total area of only hundreds of mu (Chinese measuring way), but for SONGUO industrial park, one warehouse covers the area of over hundreds of mu.
In terms of sales, according to updated data released by Passenger Connectivity Association, in October, the peak selling month, the sale of electrical vehicles reached 117 thousand. Namely, the planned capacity of SONGUO motors in next year is equal to the national sales of two months during peak season.
In addition, according to Development Schedule of New Energy Industry in Shandong (2018-2028), the accumulated amount of electrical vehicles possession in Shandong is up to 146 thousand till September 2018, less than the planned capacity of SONGUO motors in three seasons.
Zhou Haiyan said, “Orders that we have received this year has exceeded capacity of project in the next year and already received deposits from customers”. New energy equipment Industry Park plans to build a new park of tens of billion in three years and cultivates 2-3 listed companies in six years. Therefore, she said, “in future, SONGUO motors will continue to increase its capacity”.
In fact, SONGUO’s multiple research institutions and technical departments including vehicle engineering and style design of SONGUO motors, and the first SKD assembly plant are in abroad. From styling design to assembly and selling, SONGUO motors is more like an export-oriented industry. Zhou Haiyan said, “In the next two years, our main targets are in overseas markets”.
Domestic electrical vehicles industry is undergoing the process of closing ineligible companies and controlling capacity, and local market in Shandong needs to improve. However, SONGUO motors chooses assembly and selling abroad, and domestic modules manufacturing and operates on its own way, which is indeed immune to domestic industry environment.
Integrated industry cluster
Nevertheless, the key department of operation, technology integration and manufacturing base certainly land in high-tech zone of Dezhou, and have upstream suppliers.
In showroom of SONGUO motors, the journalist noticed that there are some unusual features of the three displayed vehicles. First, the body is completely made of “plastic”. Second, one new energy logistic motor powered by liquidated natural gas, the traditional energy.
What are the unusual features of these product? “This is related to the lessons we have experienced”, Zhou Haiyan said, “our new material factory once had a 40-meter-long manufacturing line, and parts were supplied by more than 50 suppliers. One time, a supplier’s screw had quality issues, and as a result we can only solve it through dissembling the products and repeating the assembly along the manufacturing line”.
In high-tech integration area like electrical vehicles, how to ensure the quality of parts provided by upstream suppliers? To this end, SONGUO’s decision is to supply parts by itself.. The body was made by high polymer material researched and produced by Hoston G-WIT GROUP Company. Zhou Haiyan introduced that Blackstone Holding Company is a shareholder of the major suppliers and said, “General percentage is 10-30, and we don’t pursue the control of shares but we must know it clear.
However, in line with the general law of motor industry, the major motor plant cannot participates as a shareholder of every supplier. Data shows that the supply chain of vehicle industry outnumbers 3000. To achieve above shareholding plan, SONGUO motors must simplify manufacture technique so as to simplify supply system, which is relevant to the second unusual feature of product. Zhou Haiyan introduced, “the chassis of our vehicles applies space frameworks. Therefore, according to demand, we can adjust power system layout as a way to enable manufacturing of traditional vehicles using engine and electrical vehicle requiring to place battery set. As a result, it will achieved simplification.”
The simplification of manufacturing technique eventually is embodied in the system of supply chains. Zhou Haiyan said, “We reduced our upstream supplier to over 6 hundred, and only about 1.2 thousand including B suppliers.” According to the introduction, there are 24 registered companies now in new energy Equipment Park, the project of Hoston G-WIT GROUP company estimates to complete construction in October this year besides SONGUO motors, and EVERPRO new material has been put into mass production. She said, “In three years, more than 60 core suppliers including foreign-funded enterprises and joint venture landed in the park.
It still requires time to drive the development of industry cluster.
According to the materials provided by high-tech zone of Dezhou to Economic Herald, the introduction of new energy equipment industrial park project marked a commercial shift from introducing projects and enterprises to introducing industry funds and industry cluster in Yucheng. Namely, it is “attracting one company, bringing an industry cluster, and driving the development of economy”. Of course, the former is SONGUO motors, and did brought a line of upstream supplier. But as for now, it still needs time to achieve the latter.
The journalists found that the upstream industry of SONGUO motors is mostly related to high technology, such as liquidated natural gas or gasoline engine as mentioned above. The technology of the motor is only mastered by two enterprises, and the joint venture that SONGUO own shares just finish registration; the exterior design group is in Italy, the research and development group of hydrogen cell technology is in the United States and intelligent driving technology group is in Korea……but the existing industry in Yucheng is hard to match above high technology; the journalists found that although SONGUO motors’ research base landed in high-tech zone of Dezhou, the group members of its research and development institute are mainly from overseas.
Zhou Haiyan said, “In domestic, we have huge vehicle markets, but the industry environment is not sound. Our stock-holding enterprises are also upstream suppliers of some large vehicle enterprises in China, facing serious problems such as unequal contract and payment delay”. SONGUO motors achieving coordinative development with upstream suppliers through owning stocks is a way to improve and distribute resources by funds. She believed that it is a new attempt in vehicle industry.
Du Yang, the journalist of the Economic Herald.
