Analysis of China's auto parts market development

Along with China becoming the world's largest automobile production and sales country, the auto parts industry is also growing. From the perspective of the world, China's spare parts industry has broad space for development both in terms of horizontal scale development and vertical technology upgrade. However, the pattern of the local parts industry is weak, small and scattered. Although the scale of the industry is relatively large, it lacks economies of scale. The key parts and components are almost entirely occupied by foreign capital. The competitiveness of the industry is mainly reflected in cheap labor and resource costs. Under the background of global procurement of auto parts, local parts and components companies with technological and R&D advantages and scale advantages will have more room for development.

The current status of the industry's operations From January to October 2010, the total profit of the auto parts industry is still growing, but the growth rate has slowed down; the amount of imports and exports has also increased, but the imported products are highly profitable with gearboxes and engine parts. High value-added, high-tech products are the main products, and export products are mainly labor-intensive and resource-consuming, such as tires, electronic instruments, and low barriers to entry.

The downstream vehicle industry currently has excess capacity. Although unconventional high-speed growth occurred under various national stimulus policies in 2010, production and sales growth slowed in 2011 and pressures on overcapacity increased. Affected by this, parts and components industry There may be pressure for greater profits in half a year.

The major problems faced by the industry are squeezed both upstream and downstream, and the industry is facing double pressure. The parts industry is the two industries that are squeezed, and there is a lack of bargaining power for upstream and downstream industries. The upstream raw materials are mainly steel, rubber, plastics, fabrics, etc. Their prices are ultimately determined by the prices of bulk commodities such as steel, petroleum, and natural rubber. Auto parts companies can only avoid risks by judging the trend of upstream commodity prices. At the same time, the downstream vehicle manufacturers are mostly large corporations and large corporations. They are in a strong position in the game with the interest of parts and components companies. They have strong negotiating power and can pass on cost pressures to the auto parts industry. Therefore, parts are actually at two ends. The squeezed "sandwich" sandwich status.

The industry is large in scale but lacks economies of scale. According to statistics from the Institute of Automotive Engineers, the output value of China's spare parts industry has exceeded 1.2 trillion yuan, and the scale of the industry is large. However, there are currently more than 20,000 companies in the industry, and the average output value of each company is only About 0.6 billion yuan, lack of funds, small-scale production, weak strength, lack of economies of scale. Take Bosch, the world's leading auto parts industry, as an example. In 2010, the sales revenue was nearly 50 billion U.S. dollars, while the sales revenue of China's largest component company Wanxiang Group was only 3.3 billion U.S. dollars. The R&D capability of core components is weak, and local competitiveness is mainly reflected in labor-intensive and resource-consuming products. The competitiveness of China's auto parts industry is mainly reflected in cheap labor costs and resource costs. It does not master high-end product technologies and lacks R&D capabilities. According to the survey of the parts and components industry conducted by the Automotive Engineering Society in 2009, China’s auto parts companies’ R&D investment currently accounts for only 1.4% of sales revenue, which is far below the average of 5% of multinational companies.

The weak R&D capability of core components is a weakness that hinders the development of the industry. At present, products such as automatic transmissions, ABS, and airbags are still domestic gaps, and they are at the low end of the value chain in the global automotive industry's vertical division of labor system, and a few high-tech components. Although the product has a certain amount of research and development capabilities, quality stability cannot be guaranteed and commercial applications are still not available.

Domestic parts are mainly used for self-owned brand cars, and the market share is low. According to data from the Ministry of Commerce, foreign capital controls most of the market share of auto parts, and domestic sales of parts and components only account for 20%-25% of the whole industry. Auto parts manufacturers with foreign backgrounds account for over 75% of the entire industry. Of these foreign suppliers, 55% are wholly-owned enterprises, 45% are Chinese-foreign joint ventures, and local parts are mainly used in self-owned brand cars, which have a low market share. In the areas of high-tech content such as automotive electronics and engine parts, the foreign market share is as high as 90%. Among them, the output of key components such as automotive EFI systems, engine management systems, ABS and airbags, and automatic transmissions, etc. The proportions are 100%, 100% and 91%, respectively, and 69%.

The international trade situation has become more and more severe. Since China's accession to the WTO, auto parts and components have begun to enter the international market in large numbers. Although China’s auto parts and components products are inexpensive and inexpensive overseas, due to the lack of core competitiveness and strong product substitution, they have been repeatedly This kind of trade protectionism is out of the door. From fasteners to automobile tires, wheels, etc., the trade frictions that China's auto parts exports suffered have never stopped.

Industry Development Trends Under the background of global procurement of auto parts, China’s domestic parts and components companies are facing the dual pressures of high-end products without competitiveness and high labor costs for low-end products. Those with future technological advantages and scale advantages will establish a good brand. Enterprises will gain greater room for development. Companies that acquire technology through overseas mergers and acquisitions and have a blood relationship with large automotive groups will achieve rapid growth.

The fundamental policy for China's spare parts enterprises to become bigger and stronger is to increase R&D and technology levels, and to upgrade the status of the industry chain, so as to effectively break through the industry bottlenecks and achieve rapid development. However, at present, China's parts and components manufacturing enterprises have fallen behind the international advanced level for at least ten years. In order to achieve a leap-forward development in the short term in the absence of talent and technology, it is necessary to rely on the power of capital. Therefore, in the future, there will be two types of enterprises that will achieve rapid growth. One is companies that acquire technology through overseas mergers and acquisitions, such as the recent acquisition of U.S. General Motors Nextee steering system by Beijing Pacific Century, and Weeping Power’s acquisition of French engine manufacturer Moteurs Baudouin. The other is a company that has a blood relationship with a large automobile group and uses its strength to achieve large-scale operations. The automobile industry adjustment and revitalization plan announced in 2009 also clearly stated that the entire automobile industry will be merged and restructured so that automobile enterprise groups with a production and sales scale of more than 90% of the market share will be consolidated within 10 companies. This trend will be transmitted to parts and components companies. Big auto group component manufacturers will achieve rapid development.

System and module suppliers and brands, technology manufacturers will stand out from the competition.

The structure of the international auto parts industry is pyramidal. The spire is the system supplier, the tower body is the module supplier, the base is the parts supplier, the corresponding profit distribution is from high to low, and China's auto parts industry is at the bottom of the tower. The profit rate is low and survival is under pressure. Therefore, those parts companies that actively expand their business to the top and move toward module suppliers or system suppliers, or those who focus on achieving technology upgrading or brand building in the spare parts sector, will stand out from the competition.