Reprinted by China Securities Journal • China Securities Network

"Enabled by science and technology with constant development of innovation, more and more Chinese enterprises of manufacturing industry keep making breakthroughs in the market competition, especially the seat industry of New Energy Vehicles(NEVs), which is entering a rapid development stage." Chen Bangrui, Chairman of Tiancheng Controls(TC), said recently in an exclusive interview of China Securities Journal.

From traditional construction machinery and commercial car seats, TC has expanded its business scope to passenger car seats, aviation seats and child safety seats. With years of technological reserves and R&D, TC blazed a trail in industrial restructuring.

Soaring Orders

"It's growing pretty fast," When it comes to the business of NEV seats, Chen told the reporter, "Since this year, our company has participated in many bid invitations of passenger car seats, of which NEVs accounted for a large proportion, which means the demand keeps growing."

As is shown in the official statistics of China Association of Automobile Manufacturers(CAAM), in July of 2021, the production and sales of NEVs reached 284,000 and 271,000 respectively, with a year-on-year increase of 1.7 times and 1.6 times. From January to July 2021, NEVs saw a year-on-year increase of 2 times, with production of 1,504,000 and sales of 1,478,000.

Chen believes that with the rapid development of NEV industry, the seat market will boom gradually. As to NEV industry, domestic enterprises of spare parts and international giants are on the same starting line. “Take car seats as an example. Foreign brands have got more experience in the traditional market of passenger car seats since years ago, which makes it pretty difficult to undermine the traditional competition pattern of automobile supply chain. However, the NEV seat market is different, because many NEV plants are still in the stage of supply chain construction. Domestic seat brands including Tiancheng Controls can win more customers in the competition with advantages in technology, quality control and service.”

“As the first domestic car seat supplier listed in the Volkswagen Supplier System, TC has supplied NEV seats to SAIC and WM. Since April of this year, customer demand, production and sales have increased significantly. Among the four production bases of passenger car seats in operation, currently Ningde Plant and Tiantai Headquarter Plant are specialized in NEV seats. In the first half of this year, Ningde Plant saw a year-on-year growth of 598.40% in sales revenue; meanwhile, Tiantai Plant has also started its supply to WM NEVs. Our company will continue to focus on the NEV seat market: Shanghai Fengxian Plant is now under construction, which will mainly serve NEV plants in Shanghai and its surroundings after completion.” Chen added.

Sci-tech Innovation as "CITY MOAT"

At the production base of passenger car seats located in Tiantai, Zhejiang, workers are busy on the production line. On one of the full-automatic production lines not far away, finished products of seat recliners are being delivered by a manipulator. "Full-automation not only reduces labor costs significantly but also improves productivity and the pass rate as well." A worker told the reporter.

Having been in the manufacturing industry for years, Chen is well aware that to maintain the vitality and competitiveness in the fierce market competition, apart from a right race track, a deep enough "CITY MOAT" shall be built in the production line. He said that among the four business sectors, technological R&D and production of key parts is particularly important. Only with science & technology and delicacy management can manufacturing industry enhance profit margins and risk tolerance.

Take the sector of aviation seats for instance. Despite the growth rate of 30%-40% in Annual Sales Revenue, the procurement cost of related core parts is rather high in Europe, which restricts TC’s profit margin in the business of aviation seats. "If 80% of aviation seat parts can be localized, the cost is expected to be cut as much as 20%-30% as a whole, which means the profit will be improved dramatically." Chen told the reporter that Carbon Fiber of aviation seats is in the process of certification.

In the sector of passenger car seats, TC quickened the pace of independent R&D. Chen said that with the development of NEV industry, intelligent interior is becoming a future trend, which puts forward new demands in intelligent upgrading of car seats. In recent years, TC continues to increase R&D investment in lightweight and intelligent seats of NEVs, which will be the next strategic priority.

On the one hand, in terms of lightweight R&D, TC has developed car seats with Al-alloy Frame, which will be 30% lighter than traditional steel structure seats. The lightweight technology takes the lead in the industry of car seats, with technical strength that can match world's top NEV enterprises; on the other hand, with regard to intelligent R&D, intelligent seats for driverless cars are under development: start with the operation system and adjustment system. Improve the in-vehicle environment with electrical and intelligent adjustment system based on different demands.

Obvious Chain Reaction of Business Sectors

"From construction machinery and commercial car seats to passenger car seats and aviation seats, then child safety seats, though the race track keeps changing, a mutually beneficial force will form." Chen told the reporter that when laying out different product lines two issues were taken into account, including: 1) whether to adhere to TC's core business to enhance the competitiveness; 2) whether a mutually beneficial force will form among different sectors.

"For example, NEV seats are more and more demanding in lightweight, in which we have accumulated a lot of experience in the business of aviation seats, making it possible to boost lightweight R&D and application of NEV seats." Chen said if years of experience in R&D and production of passenger car seats can be applied to the design and production of child safety seats, safety and comfort can be improved significantly.

Concerning the market forecasting, Chen believes that with the picking up of aviation market and the localization of related parts, the profitability level of Aviation Seat Sector will be improved gradually. Meanwhile, as the cost consciousness of parts procurement significantly increases in main engine plants, Tiancheng Controls’ business of NEV seats will have a great many development opportunity in the future, which will become a major profit engine.