Behind the "Made in China" car: The domestic automobile industry "Shengshi Weiyan"


"To replace foreign technology with the domestic market", the original intention of the development of China's auto industry, is being collapsed by the CKD (all parts assembly) model. Faced with the specious "Chinese-made" cars on the streets, we face the danger of empty technology and market.

Seeing the BMW car in front of him, Du Ying's first feeling was surprising.

As a media reporter in Shenyang, Du Ying was invited to visit the Brilliance Group's BMW production line to visit the first batch of domestic BMWs. However, the birth of the BMW with its exquisite BMW in China was incredibly simple. “It was the body that came from Germany and the four Goodyear tires in China.” Du Ying said, “The localization rate is not yet To 1%."

The first batch of more than 1,000 BMWs was produced in this way in line with Brilliance’s other brand, Chinese cars. This is obviously far from the 40% localization rate announced by BMW Brilliance.

In this regard, the interpretation of BMW Brilliance is that after the German company assembled a vehicle without tires in the local area, it was shipped to Shenyang and then Brilliance added tires, so that the performance of the first BMW vehicles can be well guaranteed and can be effectively avoided. The first batch of new cars are prone to faults.

It seems that this is a benefit to the consumer and an advantage for the manufacturer. This mode is CKD (all parts assembly).

This model has been widely used in joint venture car production, and it can even be said that it is this model that has contributed to the prosperity of the Chinese automobile industry in the past two years. “Most of the new cars that went offline in the past two years were produced in the form of CKD (All Parts Assembly) and SKD (Half Part Assembly).” Jia Xinguang, chief analyst of China Automotive Industry Development Consulting Company, said.

All over the country

Mondeo is a new car that Changan Ford launched in May this year. From the preparation to the downline, this car is only a short period of three months and is a typical CKD-produced sedan.

"Our assembly work is very simple," said Guo Yu, public relations manager at Changan Ford, pointing to Mondeo's assembly line. Workers dressed in blue overalls are working on the assembly line. All they have to do is put together a few big pieces and become a "domestic" Mondeo.

According to Changan Ford's plan, there will be 4000 Mondeo cars produced in this way in 2003.

Ford Mondeo used a vehicle import method last year and the maximum price was 367,000, which was very popular in the market at the time. However, due to the country’s strict quotas on vehicle imports, the number of imported vehicles is limited. In order to meet market needs, Ford decided to use CKD in 2003 and set a price of 285,000 yuan. "This is equivalent to enjoying an imported car with the fastest speed and lowest price, so Mengdiou sold very well." Guo Yu said.

Mondeo's success may explain why so many multinational companies are increasingly keen to build cars in CKD mode.

Among the many manufacturers that produce cars by CKD, Beijing Modern is undoubtedly the most typical. The company, which was established in October 2002, produced 20,000 Sonata cars in June 2003 and was called "modern speed." As fast as "modern speed" is the increase in the export volume of Korean auto parts.

According to statistics released by the Korea Automobile Industry Association on October 12, in September, South Korea's automobile assembly exports were driven by factors such as exports to China, and the export volume reached 37,800 vehicles, representing a huge increase of 212.4%. Among them, Hyundai Motor Company's automotive assembly exports account for more than half of South Korea's total automotive assembly exports.

Prior to this, Audi's oldest driver, Audi, had used the same method to achieve the Audi A4's Chinese manufacturing, and Mercedes-Benz, who was soon to arrive, also made the CKD model its only choice in the Chinese market.

Policy vacuum CKD comeback

In fact, CKD is not new in the short history of the development of the Chinese automobile industry.

As early as 1985, Beijing Jeep of the Beijing Automotive Group, the earliest joint venture in the Chinese automotive industry, began to use CKD to build vehicles. Subsequently, FAW's Jetta and SAIC's Santana also used this method of production.

A former manager of Beijing Jeep who participated in the joint-venture negotiations in the same year said: “The road to CKD is to gradually localize, to familiarize with and master foreign new technologies, and finally to develop new products.”

In fact, CKD has indeed increased the overall production level of the domestic automobile industry. In 1985, when Shanghai Volkswagen began producing Santana, the technical capacity of the domestic auto parts industry was almost zero, but now Santana's localization rate has almost reached 100%.

However, at the same time, the disadvantages of CKD gradually emerged. After nearly 10 years of development, Chinese car producers have discovered swiftly that in addition to simply replicating existing models, the capacity for independent development is almost zero. The "market-for-technology" plan does not seem to have the desired effect.

As a result, in the “Auto Industry Industrial Policy” promulgated in 1994, the CKD model was shelved. In the following years, the import of whole vehicles and spare parts was strictly limited. After introducing the product manufacturing technology, auto companies must implement localization of products and link them with the corresponding tax rates. The higher the localization rate, the more preferential the tax rate.

However, after China's accession to the WTO, the foundation for the implementation of these policies began to fluctuate, because according to the WTO agreement, China will no longer require the localization rate. This actually means that the 1994 version of the "Auto Industry Industrial Policy" has been virtually useless.

So far, new industrial policies have still not been introduced. "The policy vacuum has caused the CKD to come back," Jia Xinguang said.

With the gradual liberalization of tariffs, vehicle imports have actually been difficult to stop, and import quotas have become the last weapon. “After joining the WTO, the quotas are tilted towards parts. The government has obvious intentions. In the case of certain quotas, in order to restrict the vehicle imports, they have to liberalize the quotas, and the two evils are lighter,” said Jia Xinguang.

According to the latest customs statistics, the total imports of China's automotive products and their key parts and accessories reached US$9.31 billion in the first eight months of this year, a year-on-year increase of 94.7%.

At the same time, the sharp decline in spare parts tariffs has created conditions for multinational companies to adopt the CKD approach. Prior to the WTO, the tariff on parts and components was about 30%, and by 2006 it would have dropped to 10%. "The average tariff for parts and components is now more than 10%," said Zhang Yu, chief analyst of Asian Steam Resources.

Different from being forced to adopt the CKD method in exchange for technical considerations, China also showed a high degree of enthusiasm for the CKD approach. This is due to the huge benefits behind this approach.

In March 2000, the Aeolus project was launched and the project was started with 23 million yuan. The profit was 50 million yuan that year. After three years, Fengshen’s profit accounted for almost half of Dongfeng Motor’s total profit. Beijing Hyundai used its original CKD assembly plant, CKD, to produce Sonata. By the end of August, the factory was vacated and it was possible to get out of the car in November. It only needed a mobile platform.

"These practices are supported by the local government," said Zhang Boshun, secretary general of the Market Trade Commission of the Automobile Industry Association. He believes that the buzz of the auto market has made the automobile projects in various places more and more urgent.

Manufacturers are wasting time

“No one can deny that CKD has indeed brought new weather to the Chinese auto market.” said Zhang Yu. This model greatly accelerated the speed of the new car off the assembly line, leaving China to bid farewell to Santana and Jetta. Consumers have more choices, they can buy more personalized cars at lower prices, and the car market that has been quiet for years has become so hot.

However, a simple market is not the only goal pursued by China.

Dong Yang, a senior manager of FAW, believes that the auto industry is a pillar industry of the national economy, and the developed countries are all in control of the auto industry's control power in their own hands. "If it is only OEM production, the technology is all other people, but also what control?"

China first advocated independent research and development in order to obtain technology. Later, CKD was used to acquire technology. Later, CKD was also called to acquire technology. Regardless of the direction of the Chinese automobile industry policy, the concept of seeking technology has not been shaken.

However, the prosperity brought about by CKD today seems to have derailed the Chinese auto industry from its original course.

As long as they do a good job in public relations and wait for the KD (part-assembly) project, the complex automobile manufacturing process will become a simple dismantling work, bringing huge profits.

This kind of guiding ideology and the attitude of some local governments in eager for quick successes have created a number of KD factories that have enjoyed their own success. According to Zhang Boshun, of the 120 existing automobile production plants in China, only two companies have annual production of more than 500,000 vehicles, and as many as 95 of less than 10,000 vehicles, of which 70 have an annual output of 1,000. Below the vehicle, most of them are KD manufacturers who are under local protection and are right in front of them.

Zhang Boshun believes that while causing repeated construction and “scattered spreads,” due to the large number of imported foreign parts assembled in China, the domestic spare parts industry will also be unable to develop, and parts and components will be the key to the development of the automobile industry; and CKD assembly is A short-term behavior, it can not fundamentally improve the quality of the Chinese auto industry, it will indiscriminately consume the precious time of the development of the Chinese auto industry.

In the face of an increasingly open market, does today's grand banquet become the last dinner of the Chinese auto industry?



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