(Yicai) March 7 -- Valeo is changing its strategy to make better use of China's labor market shift to the advantage of high-tech talent instead of cheap labor, according to the chief of the Chinese arm of the French auto parts supplier.

"China is no longer a country with advantages in low labor cost but dividends of knowledge and engineers in electrification and intelligence," Zhou Song, president of the Chinese business of Paris-headquartered Valeo, said to Yicai. “So we are changing our development philosophy in the country to make more use of the talent dividend in our business development to improve our product identity and competitiveness.”

Valeo entered China in 1994 and now has 35 plants and 14 research and development centers with around 18,000 local employees, including 4,500 R&D workers.

Many foreign companies have moved their plants to Southeast Asia from China in recent years because of rising labor costs and other factors.

But Valeo swims against the stream as the firm hiked its investment in China early this year, choosing to build a project in Jiangsu province to make lights for cars. Shortly after that, it invested around CNY2.9 billion (USD402.8 million) to establish a base in Shanghai to make products such as autopilot cameras and laser radars.

Shanghai and the Yangtze River Delta region are considered to have high labor costs, but Valeo still raises investment in the region because it bears witness to changes in China’s automobile industry, Zhou noted.

It is a trend to hire designers and tech talent in China. Renowned foreign producers of car parts such as Bosch, ZF Friedrichshafen, Continental, and Faurecia have recently announced their plans to downsize abroad to focus on electrification and smart driving but they are still expanding their R&D teams in China.

In China, Valeo has the highest share of R&D workers among all staff in comparison to other countries, even more than in its French HQ, per Gu Jianmin, chief technology officer at Valeo China.

Valeo has completely transformed from 'Made in China' to 'Invent With China' over the past decade, Gu said, adding that many innovative products linked to artificial intelligence, autonomous driving, and electrification, have been developed in the country for global use.

Despite the fierce competition, Valeo's China business surged last year, according to its annual report. Sales jumped by 10 percent from the year before to make up a larger share of 17 percent of the group's global business. More than half of Valeo's local orders came from non-joint venture brands.

Editor: Emmi Laine