In the wake of an ongoing value war among vehicle producers in China, Chongqing Changan Automobile, a state-owned automaker, has faced backlash from its suppliers after slicing their funds by 10%. The suppliers claim that they’re being unfairly pressured to bear the brunt of the extreme competitors within the world’s largest auto market.
Since January, over 40 brands have slashed costs in China, following Tesla’s lead, as automobile demand slumps and producers struggle for market share. This has resulted in a ripple impact throughout the industry. In March, Changan knowledgeable its suppliers that the price cuts by its rivals had negatively impacted sales of a few of its fashions.
A letter from Changan’s suppliers within the southwestern metropolis of Chongqing, where the company is headquartered, started circulating on Chinese social media on June 5. Be the first in the matter have confirmed that the letter was sent to Changan’s procurement division. The letter urged the automaker to reverse its choice, stating that the transfer was prompting different manufacturers to observe go well with and disregarded the suppliers’ years of assist to the auto business.
One of the sources revealed that the percentage by which Changan was requesting suppliers to lower their costs diversified, with some bigger suppliers being requested to soak up cuts of less than 10%. Earlier this year, Zhejiang Tongxing Technology, a vehicle air con techniques manufacturer, disclosed in its IPO prospectus that Changan Automobile Group was amongst clients who had requested lower prices final yr.
In the letter, the suppliers highlighted that that they had turn out to be “blood donors” to the Chinese automakers’ efforts to compete using a low-price strategy. They warned that the present situation would “definitely cause antagonistic results at house and overseas and can trigger numerous Chinese auto suppliers to fall into dire straits or go bankrupt.”