COVID-19 - China Auto Parts Procurement

Can we focus on sourcing and the big issues that you are having on sourcing and shipping them to the correct location. How are you managing that challenge today, with Tier 1 and Tier 2 suppliers?

Actually, regarding the sourcing sector, I think currently, we are trying many different types of methods, especially, trying to find some alternative suppliers, in some other regions in China, in the southern or north eastern part of China. China is a very big market which means, even for the same assembly or the same product, there two or three different suppliers. So we are trying to find an alternative supplier. We will even try to import from other regions, such as from Europe or from the United States. But, as you know, in the US, there are their own kind of issues. It’s just trying to find other solutions.

On the other hand, because, as you know, before every Spring Festival in China, we create extra stock, which means that stocks will last us through the spring break. Normally, it’s around one or two months’ supply; it depends on different products and programs. For this kind of stocks, this can also last a certain period, before we find the new solutions. Nowadays, some suppliers have already come back to normal, which means they are returning to their normal production. So this is also a solution.

But before they return to normal, we can use our stocks, to support our production line. These are the kind of solutions that we are undertaking, when we are facing these types of issues.

So you are focusing on sourcing other parts from different regions, in China. But there’s a global lockdown, outside of China and, therefore, it’s very hard to source parts globally?

Yes, you are correct. In the past, when there was no lockdown in the other countries, you could also source from other regions. But currently, this solution is not suitable anymore, because the European markets and the US market are also in lockdown.

How do you think that this is going to impact the global supply chain, in the long run? After we come out of this issue, how do you think this is going to change the way the market and industry functions?

I think, especially with the wider spreading of this virus, in different regions and different countries, I think, after this epidemic, each market, each location and each plant, should think of a better way in the future, of how to deal with this kind of situation. Because in the past, we had SARS, but at the time, China’s GDP was around only 4% GDP, but now it’s become four or five times that. That was in 2003. To be honest, in the past, we have never faced this kind of situation. There are some things, such as earthquakes or riots, in other regions or in other countries. But this kind of situation, which has affected much of the Chinese automotive market, but it has also affected companies such as Jaguar Land Rover, Volkswagen. This is not just affecting China, but globally, there are companies that have not been in this situation before. I think, in the future, the solution for this is that we will try to develop and secure current supplier bases. This is a key point.