KOH Yew-Hee: General Manager of BEHR Asia-Pacific Management (Shanghai) Co., Ltd
KOH Yew-Hee has been in this position since July 1, 2005.
The Tenth Edition of a Series of Interviews with MNC Auto Parts Suppliers
Follow customers' footsteps
Gasgoo: Mr. Xu, thank you for accepting the interview from Gasgoo.com. Please briefly introduce Behr GmbH & Co. KG, its products and technology.
KOH: Originated from a small workshop more than a hundred years ago in Stuttgart, operated by the Behr family, Behr Group has developed into a global automotive supplier with 18,500 staff with the headquarters still located in Stuttgart, Germany. Behr's production sites are scattered in major automotive industry countries, for example, in Germany, France, Czech Republic; in Canada and America of North America; in Far East Asia, Behr has a joint venture in India, three joint ventures in China, two joint ventures in Japan, and a facility to be established in South Korea. So that is the basic introduction. You can find more detailed information in the annual report.
Gasgoo: Behr to establish a facility in South Korea?
KOH: Yes. General Motors will launch a new model next year in South Korea, which is also being produced by SAIC, whose cooling modules were supplied by Behr. GM has production bases in South Korea and one in Shanghai. We will begin to establish a factory in South Korea this year to meet the Korean market.
Gasgoo: No factory in Japan?
KOH: We don't have a factory in Japan, but we have a joint venture with Toyo. The products for our Japanese customers are provided by the JV, which assembles the parts produced by Toyo's wholly owned facilities or Behr's German or Asian facilities. The main customers of the JV are Japanese OEMs, either based in Japan, Western Europe or North America.
Gasgoo: Is there any in India?
KOH: In India, we have Behr India Ltd., a 60:40 joint venture with Anand Group. It has a history over 10 years. The JV has been operating very well. Anand Group is a leading manufacturer of automotive components and systems in India, and our powerful partner.
Gasgoo: Generally, how much does Asia-Pacific area business account for your whole group?
KOH: From the perspective of sales, Asia-Pacific area now accounts for less than 5% of our global business, of which 1% or 2% is from the Chinese market. Our business in China is very new. The first facility in China was established in 2004, much later than many foreign auto parts companies. But our sales here grow tremendously. The average sales in 2006 increased by 50%-53% compared with that of 2005. This year the general growth is expected to reach 37%, and two of the facilities may over 50%. So the Chinese market is very important to us.
Gasgoo: That's to say, your growth rate is higher than the global average. Can you briefly introduce your strategy in China?
KOH: Our strategy is to follow our customers' footsteps, and meet the requirements of OEMs. When we just entered the Chinese market, we mainly supplied to the famous international brands, for example, in the passenger car market GM, VW, Audi, Peugeot and Citroën are our customers; in the truck market, our main customers are the local manufactures because there are few foreign truck brands in China. We have a joint venture in Shiyan and Wuhan with Dongfeng Group. The JV’s products are mainly for the commercial vehicles (trucks), especially heavy trucks. But some of them are for the passenger car brands in Dongfeng Group, such as the Peugeot and Citroën in DPCA, with which we have business relationship in Europe too. It's also a large portion of business in the JV. And we also supply to DongFeng Truck, Heavy Duty Truck Group, and soon to FAW.
Gasgoo: Does Behr Shanghai mainly supply for passenger cars?
KOH: Behr Shanghai only supplies for passenger cars, but it also provides an instrument to the JV with Dongfeng. They have the equipment and technology in Shanghai, so they don't need to buy such equipment again.
The challenge of establishing new plants
Gasgoo: We find that, many auto parts companies, for example, Viston and Delphi, have more than 10 plants in China, but their China businesses account for a small portion, much lower than that contributed by few plants in other countries. They explained that the reason is Chinese auto parts plants are not concentrated. The competition is not very fierce but the market develops fast, and many auto parts suppliers can survive. I wonder if Behr would have this kind of strategy like Viston and Delphi. Now you have three plants in China, would it expand to 10 or more plants in future?
KOH: I think it is possible. But now, as I said, we have just entered the Chinese market not long ago. We should run these three plants well as priority before we expand our business. Not only would we consider this issue strategically, but also economically. Now it's very important for us to enlarge the capability and improve the products and technologies in the three plants to serve our customers better and better, then we would establish new plants in China. You know, it's not easy to establish a new plant here. And money is not a problem for us.
KOH: The problem for any WOFE and JV to establish new plants in China is how to recruit suitable employees and find good suppliers. I have told you that our growth is very fast, which is a big challenge for our suppliers who have to enlarge the capability and invest more. On the other hand, the domestic suppliers may not be able to guarantee the quality of big order. We have to ensure the quality of our products for our customers, so I think we would not establish new plants in the following one or two years. Even if we intend to have new ones, they would be the branches of the three plants. It's a great challenge to start a new plant.
Gasgoo: It's true. How about the structure of your suppliers in China? You know, there are JVs, WOFEs and local suppliers.
KOH: We have all the three kind of suppliers. Some projects, for example, for BMW who has very strict requirements on the quality, we have to assemble the imported completely knocked down kits. The business with BMW occupies a very large portion of our business, but its quantity is still not the largest. And now BMW asks us to start localization. That's an example. And in some cases, we have foreign and local suppliers in the same project, if only their capability and quality can meet the requirements. We also compare the prices they offer, and the local products are not always cheaper than the imported ones. The price may be affected by the quantity and materials. So we have to think of all the factors, for example, which spare parts can be localized in different stages. And the most important thing is quality. Another challenge is that we have many competitors in the booming China market. They have been in China earlier than us, so they have advantages on, such as analyzing suppliers and adjusting their strategy according to the market. As a new comer, we have to start the cooperation with new suppliers, which is a big challenge for us.
China: a sourcing center now, an exportation base in the future
Gasgoo: Just now you mentioned that Behr entered China a little late. Some auto parts companies are doing China sourcing and what about Behr?
KOH: Yes we are. Behr Asia-Pacific Management (Shanghai) Co., Ltd was established in July, 2005 and the China sourcing business began from Jan or Feb of 2006. Now we have a sourcing team consisting of 14 people. Totally almost 20 people are doing global sourcing including 5 people in the quality department in Asia-Pacific branch.
Gasgoo: What’s the percentage of China sourcing in the whole company's business?
KOH: We are doing some China sourcing presently but it's at a rather small scale globally. There is an optimistic goal -- a very big quantity.
Gasgoo: How much accounting for, globally? Double-digits?
KOH: Probably 20%. Our goal is to reach 20%.
Gasgoo: How soon will it reach?
KOH: We hope within 5 years. Considering all China sourcing is profitable for certain commodities.
Gasgoo: People like comparing China with India. From the view of sourcing, what are the differences between them in your eyes?
KOH: One of the main differences is language communication. In the process of global sourcing, English is the working language, sometimes in German, Indian suppliers is faster than Chinese ones to understand the standards and requirements of materials. But in China, it takes time to translate English into Chinese. For us, Indian suppliers can communicate with our experts more easily. It's a second advantage. However, China is a very big country and there are a lot of suppliers so various kinds of material and commodities are available in China, much more than in India. And India has been opened up to the outside world just for several years, later than China.
But for Behr we have been there operating business in the joint venture for less than 11 years and 6 or 7 years doing local sourcing. We exported a lot of our products from India. But we did not reach that stage in China yet. So Our China business is behind India's. However, I and the headquarters believe that in the future China will be the biggest of our main supply base outside Europe.
Gasgoo: And would China be an exportation base in the future?
Gasgoo: To capture the Chinese market and take the advantage of low costs.
KOH: Right. Presently our production capability can not meet the domestic market's need. So it's not the right time for us to do exportation. We hope China to be a global exportation base. For example, we import something from South Africa, France, Spain, Germany and Czech Republic. In the future we will supply them from China.
Gasgoo: Your present engineering capability is not strong enough to do so?
Gasgoo: Do you supply for local OEMs less than others because of the limit in engineering capability?
KOH: How to say, we must consider our production capability when customers want us to supply. So it's not to say the more customers the better. We have to accept the orders according to our production capability.
Gasgoo: What is your opinion about the Chinese auto market in coming 3 to 5 years? Continue to grow or a fluctuating growth?
KOH: It's hard to forecast the Chinese market but growth is certain. In my opinion, at least within 10 years the Chinese auto industry will grow certainly. I am not sure whether it is growing as fast as these years but it is certain to grow. China is a very big country and maybe in some big cities the auto market will become saturated after years, but one of the characteristics of the Chinese market is that it has several levels which need different products, cheaper or luxury models.
Gasgoo: Very good. Thank you very much for your time.
KOH: Thank you!
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