Volkswagen's and Toyota’s suppliers must cut 20% of prices or they need to exit FAW’s supplier system
A deep reform has taken place in inner FAW since Xu Liuping served as the President of FAW Group on Aug. 2.
In recent days, it is reported that Xu Liuping had clearly requested Volkswagen's and Toyota's suppliers to have 20% price reduction for the current supplying products, or they need to exit FAW Group's supplier system, including both self-owned and JV companies. Two of FAW Group's parts suppliers respond to the news, but they said they haven't received any notice about the price-reduction request from FAW.
In 2016, FAW Group sold a total volume of 3,147,000 model units, with an increase of 10.9% year on year. FAW-VW sold 1,315,000 units, FAW-Audi, 589,000 units, and FAW Toyota, 658,000 units. The above statistics shows that the major profits of FAW Group come from its JV brands.
Once the suppliers lose the business of FAW-VW and FAW-Toyota, they may be heavily affected. Therefore, it remains unknown whether the suppliers will accept Xu's request to reduce 20% of their prices. If Xu Liuping can successfully push the suppliers to reduce 20% of the prices, FAW's self-owned cost will be furtherly decreased. The situation of annual loss for FAW Car Co., Ltd. and Tianjin FAW Xiali Automobile Co., Ltd. also can be eased.