China's auto parts market needs to be alert to foreign monopoly

In the next five years, the domestic spare parts market will be expected to reach an average annual growth rate of 20%. However, this does not mean that Chinese auto parts can be compared with developed countries.

The domestic auto parts market is still in the early stages of development. The market is uneven and not standardized. Three non-products flood the market, counterfeit and indiscriminate proliferation, and the integrity is not high, which restricts the healthy and stable development of the market to some extent.

China's auto parts and components are entering a fast-rising channel. Data show that in 2010 China's auto parts sales increased by about 44%, which is higher than the growth rate of vehicle sales of 37%, reaching 1.644 trillion yuan, and export sales revenue rose by 43% in 2010, a strong growth trend. In 2010, the sales revenue of China's service and parts after-sales market reached RMB 240 billion. By 2014, this figure will increase significantly to RMB 652 billion. It is expected that the scale value of China's auto parts industry in 2015 will reach 2.5 trillion yuan.

Some industry experts are optimistic that in the next five years, the domestic spare parts market will be expected to reach an average annual growth rate of 20%. However, this does not mean that China's auto parts can be compared with developed countries. We must not be confused by the prosperity of the surface. We need to think through calmness to find the deeper problems that restrict the development of the industry.

At present, the domestic auto parts market is still in the early stages of development. The market is uneven and not standardized. Three non-products flood the market, counterfeit and indiscriminate proliferation, and lack of trust, which restricts the healthy and stable development of the market to a certain extent.

On the one hand, most of the country’s tens of thousands of auto parts companies are small in size, with low product quality awareness and lack of competitiveness, and lack of mechanisms and incentives for corporate restructuring and integration. The annual sales revenue of most private auto parts companies is below 100 million yuan. Large-scale enterprises with incomes of more than 1 billion yuan are difficult to trace, and the market is too fragmented to have a complete supply system. In contrast, the degree of integration in foreign markets is relatively high, with about 5% of suppliers providing 80% to 90% of the total market's products. The annual sales revenue of multinational groups far exceeds 10 billion US dollars, and the gap is huge. From the 2010 list of the top 100 auto parts suppliers in the world, there is no single Chinese company, while the United States and Japan each occupy 30, Germany 17, France 7 and South Korea 4. Therefore, from the perspective of long-term development, it is imperative to find a road for the standardization and intensification of Chinese enterprises in order to promote the transformation of domestic enterprises from big to strong.

On the other hand, domestic auto parts companies lack the funds for self-development, high energy consumption, and low value-added products, and they are still in an embarrassing situation where the high-end technology of core auto parts and components is controlled by foreign parties. In 2009, China’s auto parts companies’ R&D investment accounted for approximately 1.4% of sales revenue, far below the average of 5% for multinational companies. Japanese and Korean companies spend 1 yuan to introduce technology, and they will spend 5 to 8 yuan for digestion and absorption and technological innovation. Our companies also spend 1 yuan to introduce technology and only use 0.07 yuan for digestion and absorption, resulting in domestic parts and components companies only in the traditional , Low value-added aspects to form a certain supporting scale advantages, such as wheels, tires, glass, speakers, mechanical steering brakes. However, in terms of high added value, especially in electronic technology components such as electric steering, electronic braking, suspension systems, EMS engine control, etc., basically foreign wholly owned or joint venture enterprises control over 80% of the market share. Due to the fact that there is no equity restriction on domestic engine and component joint ventures, foreign companies are undergoing a transition from equity participation to holding, joint ventures to sole proprietorship, and from occupied markets to monopolistic markets. This should also attract the attention of relevant departments. The optimization and upgrading of industrial structure should be focused on.

At this stage, China’s exports of spare parts are still dominated by low value-added products, sold to foreign countries with cheap advantages, and export prices are being rolled over each other, resulting in continuous growth in the number of exports, but the benefit growth is not obvious, and it is difficult to truly open the international market. According to customs statistics, from January to April this year, Guangdong Province exported 480 million U.S. dollars worth of auto parts, an increase of 61.6% over the same period of last year, but foreign-invested enterprises accounted for half of the total exports. At the same time, due to the rising prices of international markets such as steel, aluminum, and coal, as well as the depressing of export prices, not only has the company's profit margins been squeezed, but it has also caused the daily increase in foreign anti-dumping complaints and further increased the company's business risks. Therefore, it has become imminent to comprehensively increase the overall strength of China's spare parts enterprises.