Second, the impact of vehicle restructuring on the development of the domestic auto parts industry. The reorganization of local automotive companies has significantly influenced the growth and transformation of the domestic auto parts sector, shaping it in several key ways. First, the consolidation of vehicle manufacturers is driving a new wave of restructuring among auto parts suppliers. In response to the evolving needs of automakers, the reorganization of parts suppliers has become an inevitable trend. Globally, after major industry consolidations, only 25 multinational auto parts suppliers are expected to remain, focusing primarily on four core areas: powertrain, chassis, body, and interior. These top-tier companies will have sales volumes exceeding $7 billion. Meanwhile, companies with revenues between $2 billion and $7.5 billion may only be able to serve as regional strategic partners for global suppliers, responsible for developing and producing subsystems.
In the Chinese auto parts industry, large-scale integration is expected to reduce the total number of suppliers by 70% by 2010. This will lead to the formation of 20–30 first-tier suppliers, 250–350 second-tier suppliers, and 1,250–1,500 third-tier suppliers. As a result, several "giant" auto parts companies and large groups will emerge within the domestic market.
Another significant impact is the separation of parts companies from整车 (complete vehicle) manufacturers. Major automakers reorganize not just to streamline operations but also to enhance competitiveness in brand management, global procurement, rapid assembly, and international sales. As part of this process, internal parts divisions—such as FAW’s Fosun Auto Parts Co., Ltd. or Dongfeng Motor’s parts division—are being spun off and pushed into external markets. This is a natural outcome of the restructuring of entire vehicle companies.
Moreover, the reorganization of vehicle companies leads to changes in procurement policies. The principle of “best quality at the lowest cost, with the most advanced technology, shortest delivery time, and best service†is now guiding global procurement practices. This same standard is becoming a new rule for domestic auto parts companies. These updated procurement rules will break down long-standing group ties, protectionist barriers, and local protectionism, forcing parts companies to compete fairly based on quality, cost, and delivery efficiency.
Finally, the restructuring of vehicle companies and the adjustment of procurement rules are pushing the domestic auto parts supply system toward a more structured, "tiered" model. To accelerate product development cycles, shorten R&D time, and lower costs, system-level suppliers, synchronized development, and modular supply chains are becoming essential. This requires the domestic auto parts industry to establish a clear "pagoda-style" supply structure, where first-tier suppliers provide complete systems like power, chassis, body, and interior, while second- and third-tier suppliers handle individual components. Each company must find its position within this hierarchical system based on its overall capabilities and strengths.
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