Automotive components are the foundation of the vehicle industry and are essential to its sustainable development. Independent vehicle brands and vehicle technology rely on a capable component base, while innovation by component suppliers drives progress across the vehicle industry.
From 2005 to 2007, China’s component manufacturing sector expanded rapidly in output, sales revenue and the number of above-scale enterprises. By the end of November 2007, the sector included 7,171 above-scale companies.
During January–October 2010, industry profit continued to increase, although growth slowed. Both imports and exports grew, but imports were concentrated in high-margin, high-value and technology-intensive products such as transmissions and engine parts, while exports were concentrated in tyres and electronic instruments with lower entry barriers and thinner margins.
The industry faces pressure from both upstream and downstream. Steel, rubber, plastics and textiles are priced through commodity markets, giving component suppliers limited control over input costs. Large vehicle manufacturers have strong bargaining power and can pass cost pressure down the chain, placing suppliers in a difficult middle position.
China’s automotive component sales output exceeded RMB 2 trillion in 2011. Vehicle production and sales had already grown quickly for nearly a decade: both exceeded 13 million units in 2009 and 19 million units in 2011, keeping China first globally for three consecutive years.
As competition intensifies, mergers, integration and capital transactions among major suppliers have become more frequent. Strong domestic suppliers increasingly study the market, operating environment and changing customer needs, enabling a group of Chinese component brands to grow rapidly.
Domestic components have historically served mainly local vehicle brands and held a relatively low market share. Foreign-invested suppliers have maintained a strong position, particularly in automotive electronics, engine management, ABS, airbags and automatic transmissions.
The separation of component suppliers from vehicle manufacturers into specialized supplier groups is a global trend. International manufacturers have established many joint ventures and wholly owned operations in China, while domestic companies with stronger technology, scale and efficiency have continued to emerge. Global sourcing and localization strategies create substantial opportunities for qualified local suppliers.
International sourcing conditions continue to change with exchange rates, export policies and competition from Vietnam, India, Thailand, Australia and other markets. Suppliers must therefore combine cost competitiveness with technology, quality and dependable delivery.