Chinese companies have long wanted to sell their cars in advanced markets like the US and Germany. But consumers largely prefer familiar brands like Chevrolet and BMW when making large purchase decisions.
As a result, the Chinese strategy has shifted from selling cars to selling car parts to the big automakers who now bolt together the autos from supply chains all over the world. One of the effects of this trend is that Chinese companies have been on a buying binge, snapping up Western car parts manufacturers to expand their product offerings. Consultants Deloitte estimates that Chinese auto parts sales are growing at 22 percent a year.
The latest example was the purchase of SG Holding, the starter and generator division of Robert Bosch, the world’s largest auto parts company, by a consortium consisting of Zhengzhou Coal Mining Machinery Group Co., which despite its name is a big auto parts supplier, and Hong Kong-based private equity firm China Renaissance Capital Investment for €545 million ($598 million.)
Chinese companies have been on a buying binge in the car parts business.
One reason for the move is that companies like Bosch want to get out of commodity car parts manufacture and focus more of their attention on autonomous driving, which promises to be a lucrative niche in the years ahead.
The starter division has now emerged as an independent called SEG Automotive—the added E in the name refers to electrification -- based in Stuttgart, with the Chinese owners promising to keep all 7,000 employees in factories scattered over 14 countries.
Ulrich Kirschner, the managing director of the firm, says that while it is well know that internal combustion engines are on their way out, the mid-term is likely to see use of hybrid cars that can utilize both gasoline and electricity. As a result, SEG has developed a process it calls Boost Recuperation Machine or BRM that allows car manufacturers to add an electric motor to a gasoline powered car at a low cost.
Mr. Kirschner said that ZMJ has “a clear intention to reduce their dependence on mechanical engineering and grow in the car business.” He said in an interview with Handelsblatt sister publication Wirtschaftwoche that the ZMJ already produces generators for the Chinese market but “want to complement and expand the portfolio in this area.”
He said he expected to grow market share in the US and in China. At the moment a little more than 50 percent of the company’s turnover is in Europe.
The company’s employees were given a choice of remaining with Bosch, which is owned by a German foundation, or going to the new Chinese firm. Mr. Kirschner said that outside Germany, about 90 percent decided to go with the new firm. In Germany, only two of 100 managers stayed with Bosch instead of going to the Chinese firm, and labor union representatives negotiated a longer, two-stage transition for most hourly workers and they have now agreed to join the new firm.
German companies have recently experienced some upheaval after being sold to the Chinese. Notably, Osram, the light bulb maker, recently announced large layoffs at German factories.
But Mr. Kirschner said the transition at SEG so far has been smooth. He said ZMJ’s management,"are very solid business people” who do not take risks. “Of course we will have to get used to the new owner, but that would be the same case with an American investor or a private equity firm,” he said.
WirtschaftsWoche writer Sebastian Schaal conducted the interview. Charles Wallace, an editor at Handelsblatt Global in New York, adapted it into English. To contact the author: [email protected].