General Situation Analysis of China's Auto Parts Market Development
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 structure, China's parts industry has broad development space whether it is horizontal scale development or vertical technology upgrade. However, the pattern of the local parts industry is weak, small and scattered. Although the scale of the industry is large, it lacks scale effect, and the key parts and components are almost entirely occupied by foreign capital. The industry competitiveness is mainly reflected in the cheap labor and resource costs. In the context of global procurement of auto parts, local parts companies with technological and R&D advantages and scale advantages will have greater room for development.
Industry operation status
From the operation of January-October 2010, the total profit of the auto parts industry is still growing, but the growth rate is slowing down; the import and export volume is also increasing, but the imported products are high-margin and high-value added such as gearboxes and engine parts. High-tech products are the Main Products, and the export products are mainly labor-intensive and resource-consuming with low barriers to entry, such as tires and electronic instruments.
The downstream auto industry is currently overcapacity. Although there have been unconventional high-speed growth under the national stimulus policies in 2010, the growth rate of production and sales slowed down in 2011, and the pressure on overcapacity increased, affected by the parts industry. Half a year may be subject to greater profit pressure.
Major issues facing the industry
Both the upstream and downstream sides are squeezed, and the industry is facing double pressure
The parts industry is a two-crowded industry with a lack of bargaining power for upstream and downstream. The upstream raw materials are mainly steel, rubber, plastics, fabrics, etc. The price is 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, most of the downstream vehicle manufacturers are large enterprise groups, which are in a strong position in the interests of the parts manufacturers. They have strong negotiating ability and can pass the cost pressure to the auto parts industry. Therefore, the parts are actually at the two ends. The squeezed "sandwich" sandwich position.
Industry scale is large, but lack of scale effect
The statistics of the Automotive Engineering Society show that the output value of China's parts industry has exceeded 1.2 trillion, and the scale of the industry is large. However, there are currently more than 20,000 enterprises engaged in the industry. The average output value of each enterprise is only about 0.6 billion yuan. The scale of production is small, the strength is weak, and there is a lack of scale effect. Take Bosch, the global auto parts industry leader, as an example. In 2010, the sales revenue was nearly 50 billion US dollars, while the sales revenue of Wanxiang Group, the largest component company in China, was only 3.3 billion US dollars. The core components are weak in research and development, and the local competitiveness is mainly reflected in labor-intensive and resource-consuming products. The competitiveness of China's auto parts industry is mainly reflected in the low cost of labor and resources, the lack of high-end product technology and the lack of research and development capabilities. According to a survey conducted by the Automotive Engineering Society in the parts and components industry in 2009, China's auto parts companies' R&D investment currently accounts for only 1.4% of sales revenue, far below the average of 5% of multinational companies.
The weak development of core components is a weakness that hinders the development of the industry. At present, automatic gearboxes, ABS, airbags and other products are still domestic blanks. They are at the low end of the value chain and a few high-tech contents in the vertical division system of the global automotive industry. Although the product has certain research and development capabilities, but the quality stability can not be guaranteed, still can not be used for commercial applications.
Domestic parts are mainly used for self-owned brands, and the market share is low.
According to the data of the Ministry of Commerce, foreign capital controls most of the market share of auto parts. The sales revenue of domestic parts only accounts for 20%-25% of the whole industry. Auto parts manufacturers with foreign investment background account for more than 75% of the entire industry. Among these foreign-funded suppliers, the wholly-owned enterprises account for 55%, and the Sino-foreign joint ventures account for 45%. The local parts are mainly used in self-owned brands, and the market share is low. In the high-tech content areas such as automotive electronics and engine parts, the foreign market share is as high as 90%. Among them, the output of core parts such as automobile EFI system, engine management system, ABS and airbag, automatic transmission, etc. The proportions are 100%, 100% and 91%, 69% respectively.
The international trade situation is getting worse
Since China’s accession to the WTO, auto parts and components have begun to enter the international market in large quantities. Although China’s auto parts products are cheap and expensive overseas, they are often used in various trade protectionist ways because of their lack of core competitiveness and strong product substitution. Rejecting the door, from fasteners to car tires, wheels, etc., the trade frictions encountered in the export of Chinese auto parts have never been interrupted. Industry trends
Under the background of global procurement of auto parts, China's domestic parts and components enterprises are faced with the dual pressure of high-end products without competitiveness and low-end products labor costs. In the future, those enterprises with technological advantages and scale advantages will establish a good brand. Larger development space. Companies that acquire technology through overseas mergers and acquire blood relationships with large auto groups will achieve rapid growth.
The fundamental strategy for China's parts and components enterprises to become bigger and stronger is to improve the level of research and development and technology, and to upgrade the status of the industry chain in order to effectively break through the industry bottleneck and achieve rapid development. However, at present, China's parts and components manufacturing enterprises are lagging behind the international advanced level for at least ten years. The convenient way to achieve rapid development in the short-term under the shortage of talents and technology is to rely on the power of capital. Therefore, in the future, there will be two types of enterprises that will achieve rapid development. One is enterprises that acquire technology through overseas mergers and acquisitions, such as the recent acquisition of US General Motors Nextee steering system by Beijing Pacific Century and the acquisition of French engine manufacturer Moteurs Baudouin by Weichai Power. The other type is a company that has a blood relationship with the big automobile group and realizes large-scale operation with the strength of the group. The automobile industry adjustment and revitalization plan promulgated in 2009 also clearly stated that the auto industry will be integrated into more than 10 auto enterprise groups with a market share of more than 90% through the merger and reorganization. This trend will be transmitted to the parts and components enterprises. The parts manufacturers of the big automobile group will achieve rapid development.
System and module suppliers and brands, technology manufacturers will stand out from the competition.
The international auto parts industry is pyramid-shaped. The tower is the system supplier, the tower is the module supplier, the base is the parts supplier, and the corresponding profit distribution is from high to low. China's auto parts industry is at the bottom of the tower. Low profit margins and pressure on survival. As a result, those who are actively expanding their business to the top, component companies that are moving toward module suppliers or system suppliers, or those that focus on technology upgrades or branding in the parts and components sector will stand out from the competition.
Industry operation status
From the operation of January-October 2010, the total profit of the auto parts industry is still growing, but the growth rate is slowing down; the import and export volume is also increasing, but the imported products are high-margin and high-value added such as gearboxes and engine parts. High-tech products are the Main Products, and the export products are mainly labor-intensive and resource-consuming with low barriers to entry, such as tires and electronic instruments.
The downstream auto industry is currently overcapacity. Although there have been unconventional high-speed growth under the national stimulus policies in 2010, the growth rate of production and sales slowed down in 2011, and the pressure on overcapacity increased, affected by the parts industry. Half a year may be subject to greater profit pressure.
Major issues facing the industry
Both the upstream and downstream sides are squeezed, and the industry is facing double pressure
The parts industry is a two-crowded industry with a lack of bargaining power for upstream and downstream. The upstream raw materials are mainly steel, rubber, plastics, fabrics, etc. The price is 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, most of the downstream vehicle manufacturers are large enterprise groups, which are in a strong position in the interests of the parts manufacturers. They have strong negotiating ability and can pass the cost pressure to the auto parts industry. Therefore, the parts are actually at the two ends. The squeezed "sandwich" sandwich position.
Industry scale is large, but lack of scale effect
The statistics of the Automotive Engineering Society show that the output value of China's parts industry has exceeded 1.2 trillion, and the scale of the industry is large. However, there are currently more than 20,000 enterprises engaged in the industry. The average output value of each enterprise is only about 0.6 billion yuan. The scale of production is small, the strength is weak, and there is a lack of scale effect. Take Bosch, the global auto parts industry leader, as an example. In 2010, the sales revenue was nearly 50 billion US dollars, while the sales revenue of Wanxiang Group, the largest component company in China, was only 3.3 billion US dollars. The core components are weak in research and development, and the local competitiveness is mainly reflected in labor-intensive and resource-consuming products. The competitiveness of China's auto parts industry is mainly reflected in the low cost of labor and resources, the lack of high-end product technology and the lack of research and development capabilities. According to a survey conducted by the Automotive Engineering Society in the parts and components industry in 2009, China's auto parts companies' R&D investment currently accounts for only 1.4% of sales revenue, far below the average of 5% of multinational companies.
The weak development of core components is a weakness that hinders the development of the industry. At present, automatic gearboxes, ABS, airbags and other products are still domestic blanks. They are at the low end of the value chain and a few high-tech contents in the vertical division system of the global automotive industry. Although the product has certain research and development capabilities, but the quality stability can not be guaranteed, still can not be used for commercial applications.
Domestic parts are mainly used for self-owned brands, and the market share is low.
According to the data of the Ministry of Commerce, foreign capital controls most of the market share of auto parts. The sales revenue of domestic parts only accounts for 20%-25% of the whole industry. Auto parts manufacturers with foreign investment background account for more than 75% of the entire industry. Among these foreign-funded suppliers, the wholly-owned enterprises account for 55%, and the Sino-foreign joint ventures account for 45%. The local parts are mainly used in self-owned brands, and the market share is low. In the high-tech content areas such as automotive electronics and engine parts, the foreign market share is as high as 90%. Among them, the output of core parts such as automobile EFI system, engine management system, ABS and airbag, automatic transmission, etc. The proportions are 100%, 100% and 91%, 69% respectively.
The international trade situation is getting worse
Since China’s accession to the WTO, auto parts and components have begun to enter the international market in large quantities. Although China’s auto parts products are cheap and expensive overseas, they are often used in various trade protectionist ways because of their lack of core competitiveness and strong product substitution. Rejecting the door, from fasteners to car tires, wheels, etc., the trade frictions encountered in the export of Chinese auto parts have never been interrupted. Industry trends
Under the background of global procurement of auto parts, China's domestic parts and components enterprises are faced with the dual pressure of high-end products without competitiveness and low-end products labor costs. In the future, those enterprises with technological advantages and scale advantages will establish a good brand. Larger development space. Companies that acquire technology through overseas mergers and acquire blood relationships with large auto groups will achieve rapid growth.
The fundamental strategy for China's parts and components enterprises to become bigger and stronger is to improve the level of research and development and technology, and to upgrade the status of the industry chain in order to effectively break through the industry bottleneck and achieve rapid development. However, at present, China's parts and components manufacturing enterprises are lagging behind the international advanced level for at least ten years. The convenient way to achieve rapid development in the short-term under the shortage of talents and technology is to rely on the power of capital. Therefore, in the future, there will be two types of enterprises that will achieve rapid development. One is enterprises that acquire technology through overseas mergers and acquisitions, such as the recent acquisition of US General Motors Nextee steering system by Beijing Pacific Century and the acquisition of French engine manufacturer Moteurs Baudouin by Weichai Power. The other type is a company that has a blood relationship with the big automobile group and realizes large-scale operation with the strength of the group. The automobile industry adjustment and revitalization plan promulgated in 2009 also clearly stated that the auto industry will be integrated into more than 10 auto enterprise groups with a market share of more than 90% through the merger and reorganization. This trend will be transmitted to the parts and components enterprises. The parts manufacturers of the big automobile group will achieve rapid development.
System and module suppliers and brands, technology manufacturers will stand out from the competition.
The international auto parts industry is pyramid-shaped. The tower is the system supplier, the tower is the module supplier, the base is the parts supplier, and the corresponding profit distribution is from high to low. China's auto parts industry is at the bottom of the tower. Low profit margins and pressure on survival. As a result, those who are actively expanding their business to the top, component companies that are moving toward module suppliers or system suppliers, or those that focus on technology upgrades or branding in the parts and components sector will stand out from the competition.
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