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With the rapid growth of the automotive industry, China's auto parts sector is increasingly drawing attention. In recent years, the rising volume of auto parts exports has highlighted the promising future of this industry. However, it remains a fact that China's auto parts industry is large in scale but lacks strength, with limited technological capabilities and weak competitiveness. Meanwhile, multinational automakers are intensifying their efforts to control the auto parts market through full ownership or strategic partnerships.
As China enters the "Eleventh Five-Year Plan," the question arises: where is the auto parts industry heading? At a recent high-level forum on the development trends of China's auto parts industry, experts discussed these challenges. While there is a risk of marginalization in the short term, the localization of the auto parts industry still holds great potential in both domestic and global markets.
The development of China’s auto parts industry began in 1953, initially supporting the production of trucks at FAW and the Second Auto. Since 1978, with the growth of the car industry, the parts sector entered a period of expansion. Technological advancements and increased foreign investment in the 1990s further fueled its growth. The auto market boom and new industry policies since 2000 have significantly accelerated the development of the sector.
Today, the industry has taken shape, marked by the emergence of numerous competitive manufacturers. According to data from the China Association of Automobile Manufacturers, in 2004, the top 100 auto parts companies generated 196.6 billion yuan in sales, accounting for nearly 60% of the total industry revenue. Some companies exceeded 10 billion yuan in sales, showing strong performance. In 2005, the industry continued to expand, with Wanxiang Group achieving 26.2 billion yuan in revenue, reflecting steady growth.
The industry's development has also reshaped its structure. Shen Ningwu, deputy secretary-general of the China Association of Automobile Manufacturers, notes that China's auto parts industry has moved beyond the old model of small-scale, low-quality production. It now offers complete supply systems for domestic automakers, with some companies even entering international markets and exporting steadily.
However, the rise of foreign investment poses a challenge. Over 70% of the world’s top 100 auto parts suppliers are active in China. With new industry policies, foreign firms are shifting from joint ventures to sole ownership, aiming for market dominance. Their technical and financial advantages give them an edge over domestic players, raising concerns about the risk of marginalization.
Despite this, Shen believes that while foreign firms may control key technologies for a time, the long-term outlook for China’s auto parts industry is positive. Localization, though challenging, can drive industry restructuring, improve quality, and help China become a global procurement hub.
For Chinese auto parts companies, adapting to localization trends and actively participating in mergers and reorganization is crucial. This will help reduce reliance on vehicle manufacturers and enhance overall competitiveness. Restructuring may be a tough but necessary process for long-term survival and growth.
Looking ahead, export opportunities are significant. By 2010, global auto trade is expected to reach $1.2 trillion, with China playing a key role. Exporting high-value products, shifting from after-sales to OEM parts, and improving management practices are essential steps for sustainable growth. Avoiding price wars and focusing on quality and efficiency will ensure a more stable and profitable future for the industry.