Netherlands-based health, nutrition and materials group Royal DSM has thrown its weight behind China’s new-found preference for clean-energy vehicles and digital connectivity, pledging to increase investment in the market amid huge changes in the country’s economic landscape.
“We have transformed from a supplier only to the multinational companies in China five years ago to a supplier for both multinationals and Chinese brands today,” said Dimitri de Vreeze, a member of DSM’s managing board who oversees the company’s business in Asia. “Huge innovations will take place in this market in the next 10 years.”
Huge innovations will take place in this market in the next 10 years
Dimitri de Vreeze, Royal DSM
He said that after establishing 22 production sites on the mainland, DSM would continue to seek merger and acquisition opportunities as well as investing in the world’s second-largest economy, despite worries about a slowdown in growth.
In the materials field, the Dutch company has singled out electronics and automotive as the two key industries it will focus on to chase fast business growth in China.
De Vreeze said the “focus approach” could help DSM to strengthen its innovation and development capabilities to cater to Chinese clients’ fast-changing demands.
Despite China’s increasing manufacturing might, materials science is viewed as one area whose core technologies it has yet to grasp amid its efforts to move locally-made products up the value chain.
DSM supplies to automakers that need to replace metals with lightweight materials such as carbon fibre.
Lightweight materials, essential for energy-efficient vehicles, allow electric cars to run for longer and to make the most of their battery power.
Though DSM would not disclose its detailed investment plans to expand on the mainland, Jiang Weiming, president of DSM China, said the company would gauge demand from clients on a case-by-case basis before making decisions.
New-energy vehicle sales in China have been buoyant since 2014, bolstered by government subsidies and incentives.
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In 2015 sales, including pure electric and plug-in hybrid cars, jumped by more than fourfold from a year earlier before deliveries surged 53 per cent year-on-year in 2016.
In the first half of this year, new-energy vehicles saw a 14.4 per cent jump in sales from the same period a year ago.
“Cars of today will be dinosaurs in five to 10 years,” said De Vreeze. “There will be a move to low-weight vehicles which are highly connected.”
DSM joins a clutch of global big-name companies including General Motors striking an optimistic tone regarding China’s new-energy vehicle market.
Beijing has been encouraging their wider use, to protect the environment.
“In China, we found that there is stricter legislation on emissions and water filtration, and that’s what DSM likes, because, as a company, DSM is at the forefront of sustainability,” De Vreeze said.
Global business advisor McKinsey predicted that one out of every three new car sales in the world before 2022 would take place in China, the primary source of growth for the global auto market.
“As Chinese consumers continue to become more sophisticated, automakers must reinvent their success formulas to surprise and delight them,” said Paul Gao, a partner with McKinsey. “That means delivering leading-edge connectivity options, pursuing digital innovations, participating in the electric vehicle space, and taking steps in the burgeoning used-car market.”
De Vreeze said Chinese car brands would pick up their growth in the coming years, driving demand for science-based materials such as DSM’s Dyneema-branded products, which claim to be made from the world’s strongest fibre.
In the electronics field, DSM says its plastic materials used in mobile phone antennae can help improve connectivity while reducing the weight. Normally, plastics are less capable than metals at receiving signals.