Oct. 31, 2018
Henan Zhongxin Enterprise Group Co., Ltd.
Establishment of automobile aftermarket parts distribution/sales company in ChinaAim is to construct a supply platform for authentic automobile aftermarket parts
Sumitomo Corporation (Head Office: Chiyoda-ku, Tokyo; Representative Director, President and Chief Executive Officer: Masayuki Hyodo) has reached a basic agreement with Henan Zhongxin Enterprise Group Co., Ltd. (Head Office: Zhengzhou, Henan Province, China; Representative: Ji Weidong; hereinafter, “Zhongxin Group”) on establishing an automobile parts distribution/sales joint venture company (hereinafter, “The new company”) for the purpose of selling automobile consumables and general repair parts to the Chinese automobile aftermarket.
China is the world’s largest automobile market, and sales of around 29 million new vehicles in 2017 were the highest in the world for the ninth consecutive year. The total number of vehicles in China has grown to about 220 million, and is expected to top 280 million in 2020. This increasing number of cars on the road has led to a rapid expansion of the Chinese automobile aftermarket. The average age of vehicles in China is now approaching five years, and demand for repair and maintenance over the next few years is forecast to climb several dozen percent annually. As the national income level rises, greater demand for high-quality products and services will require even better quality assurance systems, improved technical capabilities, and more transparent sales channels.
The new company will ascertain the market environment and consumer needs, and then provide authentic products and services with an emphasis on quality. Plans are to focus primarily on selling consumables and general repair parts manufactured by OEM suppliers for mid- and top-range vehicles. Sumitomo Corporation is expected to hold a majority share in the company, and will strive to construct a top-class automobile aftermarket parts supply platform for the Chinese market.
The targeted buyers will be Zhongxin Automobile Co., Ltd. (Head Office: Zhengzhou, Henan Province; Representative: Chen Jiang; hereinafter, “Zhongxin Auto”), which provides automobile aftermarket services as part of the Zhongxin Group, and a wide range of local agents. Zhongxin Auto specializes in repair services for luxury vehicles and boasts impressive repair skills and know-how (liquid analyses, engine cylinder repairs, AT rebuilds, etc.), and it has in place a sophisticated training system based on more than a decade of standardized know-how as well as brand-specific technical support systems. Zhongxin Auto has also been ranked number-one for two years running (2016 and 2017) in a customer satisfaction survey on automobile aftermarket services in China.
Sumitomo Corporation will bring to the table the knowledge it has garnered from its automobile parts distribution/sales businesses in the US and other markets and from its automobile parts manufacturing/sales businesses in the Chinese market. It possesses extensive automobile value chains, and it will be making maximum use of its know-how to provide value and services unique to Sumitomo Corporation and thereby improve safety and convenience for automobile users in China.
|■ Profile of new joint venture company (name TBD)|
|Location||:||Zhengzhou, Henan Province|
|Date of establishment (anticipated)||:||First half of 2019|
|Description of business||:||
Sales of consumables/general repair parts primarily for mid- and top-range vehicles
|Principal products||:||Oils, filters, chemicals, brake pads/discs, shock absorbers, batteries, spark plugs, etc.|
|Investment ratios (TBD)||:||Sumitomo Corporation: over 50%; Zhongxin Group: less than 50%|
|■ Profile of Henan Zhongxin Enterprise Group Co., Ltd.|
|Location||:||Zhengzhou, Henan Province|
|Date of establishment||:||March 1997|
|Description of business||:||Automobile aftermarket services, dealer services, insurance business, retail business for example mobile phone etc.|
|Legal representative||:||Ji Wei Dong|
|Number of employees (based consolidated)||:||3,000|
■ Sumitomo Corporation’s Material Issues
The Sumitomo Corporation Group has positioned “Six Material Issues to Achieve Sustainable Growth with Society” as important factors in developing business strategies and in the decision-making processes for individual businesses. Going forward, we will pursue sustainable growth by resolving these issues through our business activities. This latest project should prove especially beneficial in “Contributing to the Development of Local Communities and Industries”, “Establishing a Foundation for Comfortable and Enriching Lifestyles”, and “Providing Diversity ‘Accessibility’”.