The US vehicle parts supplier Delphi Automotive Plc announced on Thursday it will invest about $100 million in China, the largest amount the company has put into the country in its two decades of operating here.
Work on Delphi’s first diesel-power train manufacturing base in China started in the coastal city of Yantai, Shandong province, on Thursday and the base will be operational by the end of next year.
It will produce high-precision diesel fuel injection system components for light, medium and heavy-duty common rail systems, ultimately making them for cars, light commercial vehicles, sport utility vehicles, trucks, buses and agricultural and construction equipment.
Delphi’s existing operation in Suzhou, Jiangsu province, will supply engine control modules.
“Our diesel system business in China now accounts for about 5 percent of total revenue of Delphi’s global diesel business. We hope this operation will boost our China market’s contribution to one-third by the end of this decade,” said John Fuerst, general manager of Delphi Diesel Systems under the company’s powertrain systems division.
Steven Kiefer, president of the division, said: “Although from last year, the automobile industry’s growth rates slowed a bit in China, it was, and will still be, stronger than those in any other countries. We have strong confidence in China, which is critical for Delphi’s long-term success.”
Delphi’s Chinese revenue last year rose 21 percent year-on-year, far higher than the automobile industry’s average of 2.45 percent, its lowest in 13 years.
Kiefer said: “We also believe there is great potential for growth in diesel vehicles in China, and Delphi expects to obtain 20 percent of market share in this sector in the near future.”
Delphi said the initial phase of the production base will supply three important Chinese customers: Great Wall Motors Co Ltd, the Shandong Huayuan Laidong Engine Co Ltd and Yuchai Group.
Fuerst said: “As we see increasing demand for high-tech diesel systems from more Chinese customers, we plan to double the production site over the next three to five years.”
In the past three years, China’s automotive market has overtaken the US’ to become the world’s largest.
But high oil prices, environmental concerns and China’s commitment to reduce carbon emissions have seen the implementation of higher automotive emissions standards for new vehicles in the country.
Kiefer said: “As China encourages domestic vehicle manufacturers to develop core technologies in the field of high-pressure electric-controlled diesel systems with independent intellectual property rights, Delphi’s development strategy with its focus on localization and transferring core technology from Europe to this country will follow the plan.”
This will achieve a “win-win” situation with its Chinese customers and local partners, he said.