China Country Market
Insights and Opportunities
Automotive Parts Sector
Overview: China is now the second largest automotive market in the world, just barely trailing the United States. Its motorcycle market is limited by the general prohibition on motorcycles in China’s large cities. China has about 6,000 automotive enterprises, which are scattered in five sectors: motor vehicle manufacturing, vehicle refitting, motorcycle production, auto engine production, and auto parts manufacturing. This includes approximately 100 OEMs, with 40 producing passenger vehicles, and over 4000 registered auto parts/accessories companies. All tiers of the industry are being driven by the booming sales of the OEM sector. Nearly 80% of the revenue for the auto parts and accessories market is through new vehicle sales. However, revenue from after market is increasing rapidly.
Shanghai and its surrounding provinces (Zhejiang, Jiangsu, and Anhui) are the centers for component manufacturing, representing around 44% of national production. Shanghai is home to Shanghai General Motors, Delphi, Visteon, and other notable American automotive companies and, as such, provides a good starting point for U.S. automotive component exporters to begin to explore the Chinese market. Other major automotive centers in China include Guangzhou (South China), Chongqing (West China), and Changchun (North China).
Opportunities: In 2008, it’s estimated that ten million new motor vehicles in China will be sold. As of November 2007, China had already produced 8.8 million vehicles, a 33.33% rise over 2006’s figures. Most Chinese car buyers are first time buyers as incomes rise and car prices decline.
Additionally, as China’s restrictions on trading and distribution have been reduced over the years, American companies are gaining the right to distribute most of their own products, including automobiles and related parts, in any part of China. Car dealerships are also about to embark on the business of buying back and selling used cars. Imported used cars continue to be prohibited.
The main goals for Chinese automotive components, parts, and accessories manufacturers are to improve technology and quality and to develop their own design capability. Currently, a consortium is working on developing a Chinese automatic transmission, a technology which has eluded them so far. Most of the domestic automotive parts manufacturers’ R&D capabilities are limited due to the small scale of their operations and a shortage of capital as compared to international companies. However, Chinese companies are dominating the low-end components market and have aggressively sold their parts to U.S. automakers. In the next five years, the Chinese Government will continue to encourage foreign investment in automotive component development and manufacturing. In the meantime, there is still a market for imports and American products are generally highly regarded by Chinese customers.
The Chinese government has launched the “National Projects of Electric Vehicles,” that encourages the development of environmentally friendly automobiles. U.S. companies possessing clean energy parts and technologies will find more and more opportunities in the Chinese market.
A number of best prospects include: Engines for motor vehicles and motorcycles (usually by U.S. companies already in China); Auto and motorcycle casting blanks; Key and high tech automotive parts and components including disc-type breaking assembly, drive axle assembly, automatic transmission box,, engine admission supercharger, engine displacement control device, electric servo steering system, viscous continuous shaft device (for four-wheel drive), air shock absorber, air suspension frame, hydraulic tappet, and compound meter; Auto electronic devices and instruments (including control systems for engine, chassis and vehicle body); Fuel cell technology; Automotive accessories and After market products (that meet legislative guidelines for vehicle modification).