Rolls-Royce eyes more Chinese parts

British industrial conglomerate Rolls-Royce Plc said China will become a priority in its future development strategy.

Beginning in 2023, it will increase purchases from Chinese suppliers of aircraft engine components by $100 million annually, as they have competed and succeeded among global suppliers in terms of providing reasonable prices and timely delivery of products.

Last year, the company reduced its engine production volume by 50 percent, and it had to ask all of its suppliers to follow suit. Meanwhile, it is consolidating its supply chain and awarded new contracts to Chinese suppliers in 2020.

"Chinese suppliers have competed successfully for a large proportion of work. This means that from 2023 onwards, we will be sourcing up to $100 million of new business from China each year. There remains significant further potential for our supply chain to grow in China," said Julian MacCormac, country director of Rolls-Royce in China.

"Since the outbreak of the COVID-19 pandemic, there has been no disruption of work among Rolls-Royce' Chinese suppliers. It has strengthened our confidence to purchase more from China. We have cultivated an extensive network of suppliers across China that manufactures sophisticated aero engine components and parts," MacCormac said.

Globally, the company is consolidating its supply chain and working with fewer suppliers. It plans to reduce total spending as it seeks to cope with the downturn of the global air travel market.

Rolls-Royce said it has tided over the most difficult time, and it is hopeful of seeing a positive performance next year.

Meanwhile, China's goal of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060 is expected to help the company find more business opportunities in China, and it plans to contribute to decarbonization with new technologies.

"The pandemic has further urged us to transform the business and develop more sustainable power and propulsion systems," he added.

As the company makes aero engines for wide-body aircraft only, the stagnant international travel market has significantly reduced the engine flying hours of Rolls-Royce products.

Currently, China stands as the third-largest market for Rolls-Royce aero engines after the United States and the United Kingdom. Last year, China contributed to 10 percent of its total revenues, which was almost flat with previous years, according to the firm's annual earnings report.

Rolls-Royce is bidding for the contract to become the engine supplier of the CR929, a long-haul wide-body aircraft that is under research and development by China and Russia, and the company is confident it can win the bid. There is no timetable on the decision of results, according to China-Russia Commercial Aircraft International Co Ltd.

"As countries worldwide are at different stages of recovery from the pandemic, China is one of the few countries that has indicated a clear growth path in the sector. International industrial players can cash in on the growing business opportunities in China," said Yu Zhanfu, partner and vice-president of consultancy Roland Berger.

Rolls-Royce accounts for about 45 percent of the global engine market for wide-body aircraft, followed by General Electric and United Technologies Corp's Pratt & Whitney division.