Change in ordering system and locations of suppliers in the Chinese automobile industry: Case study of geely automobile

Abstract

The purpose of this study was to clarify changes in ordering system of Chinese automobile company compared to that of car manufacturers in other countries and its influences on the selection and locations of suppliers in recent years. We investigated Geely automobile company in Zhejiang province, which is the largest private car manufacturer in China Specifically, we researched two types of car: best-selling low-priced models; and middle to high class models released recently. Chinese manufacturers tend to order each automobile part from several suppliers to receive as low price as possible as a result of price competition. Geely, however, often orders them from a specific supplier when producing middle to high class models. In addition, it tends to buy completed parts from well-known, highly skilled international suppliers. As a result while realizing the production of middle to high class models, the cost of parts is rising. This ordering system follows after international manufacturers, particularly Japanese companies. The location of suppliers is shifting from Zhejiang province with many small private suppliers toward the Changjiang delta including Shanghai and neighboring cities where many major international and national suppliers are based.