Unstoppable?

Up till now, China’s foray into the market for brake components hasn’t exactly been a trouble-free experience. What a difference 15 years has made.

The country’s early rotors may have been offered at a fraction of the cost of their North American counterparts, but the products were rife with technical problems.

“There were a lot of problems with offsets, and the alloys and composites used to make them,” recalls Ian Braunstein, vice-president of sales and marketing for the Satisfied Group. The designs were prone to warping, leading to complaints ranging from spongy pedal feel to a general shudder.

Other weaknesses included incorrect fin configurations, suspect lateral run-outs, and marginal metallurgy, adds Brian Fleming, director of marketing at Affinia Canada.

However, over the past decade and a half, the quality of Chinese-made components has steadily improved; machining techniques and other parameters have been refined. According to analysts at Frost and Sullivan, products from Asia and South America now dominate North America’s market for drums and rotors, which was valued at US $746.8 million in 2004.

The rotors still don’t tend to last as long as their premium counterparts, says Braunstein, but with prices that can be 50% lower than the alternative, it is easy to see why the components have become a popular offering.

North America’s interest in Chinese-made brake components appears to be, well, unstoppable. Mainland China is expected to ship US $1.4 billion in such parts this year, marking a 30% increase over 2005, according to Global Sources’ China Sourcing Report: Brake Parts.

The supplies haven’t been limited to rotors, either; a growing number of joint ventures have led to wider product lines. (ArvinMeritor, for example, will soon begin production in a new 300,000-square-foot facility in Wuxi, Jiangsu Province.) Design and delivery times are also being slashed, while product offerings continue to improve.

In Global Sources’ survey of 81 manufacturers that produce such products:

* 41% said they are developing wider product ranges;

* 22% were shortening delivery times;

* 16% were shortening design and development times;

* 14% were improving staff training;

* 7% were obtaining certificates and approvals.

“The market is global to the point that you can’t necessarily suggest that ‘economy’ products are the only products that come out of those countries anymore,” Fleming adds. “The automotive distributors to the installers have recognized that, with some of this stuff, the quality has improved. We’re looking at a lot of joint ventures outside North America we wouldn’t have looked at five or 10 years ago.”

It’s simply a matter of ensuring that the Chinese plants can meet their standards and procedures.

“We are definitely on the road with regards to global sourcing. That’s our corporate direction,” adds Brad Shaddick, director of sales for Federal-Mogul Canada. “At one point, we were zeroed in on U.S.-made product, but [for us] to be competitive, China and low-cost-producing countries were a fact of life.

“Just about any product category you look at, there’s a certain percentage of that product that is produced in China,” he says.

Some companies are not convinced about the value of those joint ventures. Akebono, for example, continues to manufacture its products at company-owned facilities in Japan.

“We don’t like anyone else manufacturing our product,” says spokeswoman Laura Sullivan. “There’s no third party, period.”

Still, the catalogue of Chinese-made components continues to grow.

The latest brake-related frontier for Chinese manufacturers is the production of friction material. Entrepreneurs in major centres from Toronto to Vancouver, for example, have already established themselves as unofficial distributors after purchasing containers of the imported products.

But like the rotors that came before them, some of the early attempts at Chinese-made brake pads have been marred by technical problems.

“There’s a huge difference in the stagnant technology [of a rotor] and a brake pad,” Braunstein explains, referring to issues ranging from technology to the content of the friction material and the production process that’s used to make it. Then there’s the question of testing protocols.

“They don’t last,” he says of many emerging products. “You can have a good initial performance, but if you can’t finish the cycle of a standard wear test, it’s a superficial read. They are not hitting the mark.”

Fleming suggests that some of the cheapest products last as little as 20,000 kilometres–a lifecycle that likely won’t win over today’s consumers, who expect 60,000 kilometres or more. After all, end users who can’t describe the difference between a rotor and a caliper still manage to grasp the importance of friction materials, which can affect noise, dust, performance, and wear.

Once again, however, the price points can’t be ignored. In the past decade, the price of rotors has dropped, while the price of friction material has increased. And like the rotors that came before them, friction materials are expected to improve.

Could “premium” Chinese-made brake pads be far away?

“They’re still going through their growing pains with regard to friction,” Shaddick says of the manufacturers. “The premium side of it potentially could be manufactured in countries such as China down the road. Time will tell. It’s an evolution.”

“Give it five or 10 years and that will evolve,” Fleming agrees.

The lower-cost offerings would be particularly welcome for three-step distributors that are looking for new ways to compete with larger chains, adds Satisfied’s Braunstein. “But the right product and performance must go with it, as well as acceptance of the distribution base.”

Indeed, jobbers would need to be convinced that such products actually deserve the label “premium”. Consumers still resist the idea of a premium product line that’s made in China, Shaddick suggests. “There’s still an expectation that [premium products] are produced in North America” (or Europe, it should be added).

“However, this is an ever-changing landscape, and as long as a part is manufactured with the exact same expectations, and the quality is there, eventually customers will accept the product.”

In the meantime, there are steps that jobbers should take before agreeing to carry a particular product line that has been produced in a low-cost environment.

“When bringing in Chinese-manufactured product, it’s very important to ask who’s standing behind the product. Who is ensuring the technology and the testing?” Braunstein says. “We control our process [when making friction material in China], and it’s made on North American equipment, and with our formulation and mixes. We are going to markets where the right materials are available.

“Who is standing behind the product? What is their pedigree? How long have they been in the brake business? What liability, insurance, and commitment do they have? Who do I call once I buy a brake pad if I have a problem? You are dealing in a safety-related environment, and if that pad fails, who is going to support you?”

While the growth in Chinese-made products has been fueled by low-cost labour, the price-related advantages will eventually erode.

“A country like China is not going to keep knocking out the price-point of product [the same way] they are today,” Fleming suggests.

Some 5% of the manufacturers that were surveyed by Global Sources expect to increase prices by more than 15% over the next year, and 62% expect increases of five to 10%. (Granted, that could be partially linked to improving product quality.)

Price pressures are not limited to raw materials or research and development costs. Rising oil prices are bound to affect the cost of shipping these goods halfway around the world, and that would leave other countries in the position to fill the void for “entry-level” products.

“You start looking at all the cost to manufacture a product that far away and ship it to you, all of a sudden that should be a huge percentage of cost,” Fleming muses. “Then maybe Mexico doesn’t look so bad; maybe Venezuela.”

There is good news for domestic designs as well.

Automakers continue to introduce thinner and lighter components to control costs and lower weight, but those attributes have come at the expense of longevity. Those parts will simply need to be replaced more often. Meanwhile, the demand for brake pads, rotors, and calipers are all expected to grow, along with the share of vehicles equipped with two- and four-wheel disc brakes.

In contrast, vehicles are enjoying longer lives, and brake components will always be wear items that require replacements.

“Despite the impact of economy-line imports from overseas on price and product life, quality is re-emerging as a competitive factor in the North American rotors and drums aftermarket,” added one Frost and Sullivan analyst. “Manufacturers will have more opportunities to differentiate their products to attract new customers, as in the case of drilled-and-slotted rotors that have won a loyal following among racing enthusiasts.”

There seems to be plenty of business to go around.