In the overall cost of automobile production, parts and components make up between 70% and 80%. Therefore, the development of the automotive parts industry is crucial for reducing vehicle costs and driving growth in the entire automobile sector. Industry experts note that China's auto parts industry holds significant potential for development. However, due to structural constraints and other factors, this potential has not been fully realized yet.
The production and export of auto parts are expanding rapidly. According to statistics, in 2005, China’s total automobile output exceeded 5.5 million units, while sales in the auto parts manufacturing sector surpassed 500 billion yuan, marking an 18.67% year-on-year increase. The export value of auto parts reached $15.235 billion, a staggering 75.11% increase compared to the previous year. Industry insiders predict that by 2007, global automakers will spend around $50 billion on spare parts from low-cost countries, with 70% of this coming from China. This highlights the massive business opportunities awaiting China’s auto parts industry.
China is accelerating the localization of auto parts. For instance, BMW Brilliance Automotive Co., Ltd. has launched a comprehensive localization plan, including exhaust systems, axle assemblies, wheel assemblies, seat assemblies, and sunroof assemblies. Export strategies have also evolved—from exporting single products to more capital-intensive models. The industry is shifting from labor- and material-intensive exports to high-value-added electromechanical products, primarily targeting developing countries, but now also beginning to enter developed markets.
High technical content in auto parts is essential for the growth of the automotive industry. Over time, parts manufacturers have become independent from vehicle companies, forming specialized enterprises. Currently, there are over 8,000 auto parts manufacturers in China, with most global automotive leaders establishing joint ventures or wholly-owned subsidiaries. More than 1,000 companies have introduced foreign technology through joint ventures. A growing number of domestic firms with advanced technology, efficiency, and scale are emerging. As international automakers adopt "global procurement" strategies and implement localization, China’s domestic market will see a large demand for auto parts. It is estimated that by 2010, China’s auto parts production value could reach 700 billion yuan.
Despite its potential, the Chinese auto parts industry still faces challenges. Industry experts highlight that small-scale operations, outdated technology, and a lack of independent R&D capabilities are major issues. Most companies operate with low industrial concentration, with over 80% having annual sales below 100 million yuan. Technological levels remain relatively backward, with many products resembling 1980s standards and lacking modern electronic control features. Investment in the sector is also insufficient—only 0.3 times that of the整车 industry, compared to 1.2 to 1.5 times in foreign companies. Additionally, R&D investment in Chinese auto parts companies accounts for just 1.99% of sales, far below the 3% to 5% seen in foreign counterparts.
To align with global procurement trends, China must introduce supportive policies, adjust industrial structures, promote international standardization, and enhance brand services. First, the government should support the industry through policy frameworks, key technology R&D, and macro-control. Second, restructuring the industry through mergers and collaborations can help create large, competitive enterprises. Third, advancing informatization and adopting international standards will improve product quality and management. Fourth, strengthening marketing and branding will help expand both domestic and international markets. Finally, shifting from supporting vehicle manufacturers to active market participation and strategic cooperation with global players will position China as a key player in the global auto parts supply chain.
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