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Established a Sourcing & Manufacturing Presence in China for an Int’l Auto Manufacturer

 

Objective

A leading South African manufacturer of freight truck trailers approached The Beijing Axis at the beginning of 2005 to assist them with establishing a sourcing and manufacturing capacity in China. The need for a China presence revolved around three factors, namely the need to diversify suppliers, the need to reduce labour costs and the desire to gain a foothold in the Chinese market.

Methodology

The Beijing Axis conducted comprehensive research on both market dynamics and industry players and finally recommended a shortlist of 11 suppliers based on the research results and the company's specific requirements.

Outcome

During business trips to China arranged by The Beijing Axis, the client was able to meet with 11 suppliers. Eventually the client was able to locate suppliers for each product, and has built up exclusivity with a tire supplier. After one year's transactions, the trailer supplier passed all tests and both parties started negotiations on in-house designs manufactured in China. The Beijing Axis facilitated aspects such as market research, partner due diligence, the structuring of agreements, strategy formulation to protect the client's intellectual property, and general liaison. Towards the end of 2006, agreement was reached whereby the Chinese party agreed to manufacture all trailer frames, with final stage assembly performed in the original country. In addition, the Chinese party agreed to use the client's proprietary designs to manufacture and assemble a new trailer product to be sold in China. The Beijing Axis' client will be remunerated for the use of its intellectual property through a system of royalty payments which are audited and facilitated by The Beijing Axis.