OEM's in China ShanghaiLife in China is a very challenging, but also very interesting experience. An experience I would recommend to anyone. But I also have to mention that there are cultural and lifestyle-related challenges here due to Shanghai’s large population. My hometown in Spain, Zaragoza, has about 700,000 inhabitants, and Shanghai has roughly 20 million. You really get a feel for living in a multicultural environment, and the town is always booming with people from every country. This helps me forget the messy and congested traffic, the pollution, or the distance I have to travel to and from work. And interesting things are happening here.

OEM’s in China focused in domestic market

China has been experiencing a rapidly growing business environment. Nowadays, there is a market where many kinds of OEM’s coexist: from the international companies to the local ones. Chinese agricultural OEM’s are still very much focused in the domestic market in China, which offers a higher growth potential compared to other countries. However, some of them are trying to enter the global markets taking advantage of the cheap local labor costs.

When exporting their products, the Chinese brands face technical challenges, such as those related to more developed emission regulations, and therefore need to adapt their models accordingly.

Positioning their products as low cost while having to comply with higher technical requirements will become a big hurdle for the Chinese OEM’s.

What should we do?

On one side we have to approach the international OEM’s with the high-class products we have, but on the other side, we also have to approach the very cost-related Chinese market. So we have to develop our product range according to the specific requirements of the different segments of this market. Having the right understanding of the local requirements of Chinese customers, while making good use of our German standards, we can find the balance of performance and cost competitiveness and bring the additional value of our quality and service.

Keep up the good work in China

To sum everything up, we should obviously keep up the good work approaching the global audience with our high-class standards, which is always the case, but we also have to produce more at the medium range of the market. We should, however, not focus on the very low end market where cost can be the unique decision driver.

We can compete whenever the customer is interested in value-added products, when they aren’t just looking at the costs, but also performance. The only way to approach this situation is to establish different kinds of specifications for different kinds of products in different countries.

As a matter of fact, I don’t think China will be a low-cost country for long. The government policies are strongly focused on the technical development of the country in order to become a global power in innovation. Furthermore, the people in China are starting to ask for higher wages, and the income of the middle-class is increasing year by year. In the next twenty years, China will become a developed country and will have to move its industry to value-added products. This will force their OEMs to make their products at the global standard. There is a potentially large market coming up.