Business Opportunities for Foreign Innovators
A commitment to constant research and testing underpins FUCHS’ success as a market leading producer of high-performance lubricants. In China, its innovations are in line with the market’s growing appetite for high-quality, efficient, and environmentally sustainable industrial solutions. Bernd Siegel, CFO at FUCHS China, spoke to China Focus about the business opportunities that arise from this alignment and how FUCHS is seizing them.
FUCHS is headquartered in Mannheim, Germany, but has 50 companies and 24 laboratories internationally, including two advanced labs in China. How do you deal with the challenges of innovating on a global scale?
FUCHS’ global R&D strategy employs a de-centralized network of laboratories organised into “key working groups”. Together with Germany and the USA, our labs in China collaborate to develop global technology platforms that can be tailored to local market needs. The resulting advantage is that local requirements are already considered in the design phase, instead of relying on late-stage adaptation of centrally developed products.
How is “Made in China 2025” affecting your innovation initiatives in China?
Our innovations are in line with the government’s push for environmental protection. For instance, our lubricants and greases reduce fuel consumption and lower emissions in the automotive industry. Our R&D focuses strongly on greases for e-mobility and we run a grease plant in Northern China. We are also a market leader in the wind-power industry, where demand for specialised lubricants is high. With regard to metal-working fluids and their additives, we produce lubricants that allow our customers to waste-optimise their operations.
From which R&D related tax incentives does FUCHS benefit?
FUCHS is a qualified HNTE. Furthermore, some municipalities support our qualified staff with direct subsidies in their real estate acquisitions. This helps employees with a higher level of education, especially in technical areas.
How complex was the HNTE approval process?
From beginning to end, the process took almost 1.5 years. The majority of this time was spent working on the application documents and putting together the report for the relevant authorities. Once we had completed that, we still had to explain our business model during the auditing process.
Documenting our R&D work was the biggest challenge. Various departments in our company had to work together to meet the requirements of the approving authorities. The technical, chemical, and financial documents must all be complete and consistent.
What would be your advice to other SMEs considering to apply for HNTE status?
I think companies need to assess their company’s situation carefully with regard to the HNTE criteria and application requirement before making a decision on whether or not to apply, as the process itself is time consuming. Additionally, we recommend talking to the authorities and doing a preliminary check. At all stages, the involvement of a qualified consultant is advisable.
How do you anticipate the changing market in China to influence innovation-driven companies like yours in the future?
FUCHS is already seeing a shift from low cost products towards those that affect total operating cost. For example, producers of machined components usually see a less than 1% decrease in cost per manufactured part even with a significant price reduction. By using a product that is better at protecting cutting tools, they can optimise their machining process and achieve productivity increases that deliver higher savings. Therefore, instead of using innovative technology to develop efficiently designed low cost products, the new focus is on developing high performance technologies that customers can employ with the help of a team of knowledgeable application engineers.
In general, I believe innovative foreign enterprises that are committed to China and ready to establish their full value chain there will benefit from the direction in which industry is developing. The Chinese market is open to innovations.