Home » Business » Autotalk Special
Auto parts makers need support to challenge foreign dominance
By Richard Fu |
December 21, 2011, Wednesday
|
Print Edition
Print Edition
CHINA'S auto sales may be slowing, but the 100 million vehicle ownership in the world's biggest market creates a lucrative opportunity for the auto-parts and maintenance services sectors.
"For China to become a truly strong automaker, we must make the auto-parts sector strong," Wang Songlin, vice president of China National Machinery Industry Corp, said at the Automechanika Shanghai annual trade fair.
The show, held earlier this month, was sponsored by Messe Frankfurt and China National Automotive Industry International Corp, a unit of China National Machinery.
China's auto-parts sector still lags global rivals such as Bosch and Delphi in terms of innovation and technology. Wang called for more government support to help the fledgling development of the domestic industry, which comprises more than 15,000 auto-parts makers.
He also said intellectual property issues are hampering development of the domestic industry.
Large demand
Typically, after four years of owning a car, a consumer's need for parts and services reaches its peak. That means big demand in China, even though car sales are expected to show their slowest growth in 13 years.
Research firm AlixPartner has estimated that China's after-sales market will expand to 652 billion yuan (US$103 billion) by 2014, a sharp jump from 224 billion yuan last year. After-sales services in China accounted for 14 percent of total auto-parts revenue in 2010, it said. The numbers mean China is a sector too large for multinational companies to ignore. At least, that was a clear message at this year's Automechanika Shanghai.
According to data provided by organizers, this month's show broke records, with a 15 percent increase in both exhibitors and exhibition space. The show hosted some 3,600 exhibitors from 36 countries and regions.
In an opening statement, Michael Johannes, vice president of Messe Frankfurt Exhibition, said the trade fair was expecting more than 60,000 visitors from around the world, including buyer delegations from Australia, Indonesia, India, Iran, Malaysia, the Middle East, Pakistan, Peru and Poland. Also in attendance were Chinese delegations from the provinces of Hunan, Fujian and Guangdong, and representatives from leading Chinese car manufacturers such as Beijing Automotive Industry Holding Corp, BYD and Anhui Jianghuai Automobile Co.
China has an auto industry policy requiring foreign vehicle manufacturers to enter 50-50 joint ventures with local companies as part of efforts to assist the development of the domestic carmaking industry.
However, the rule didn't apply to the auto-parts sector, allowing foreign companies to dominate the manufacture of electronic brakes, suspension systems and other components without benefit of domestic link-ups that shared technology with China.
"The market is there, but we just cannot capture it," said an electronic engineer at a Chinese auto parts maker, who declined to identify himself or his company.
"For example, the manufacture of auto-electronic components still needs core technology that few Chinese companies possess," he added.
He said the March earthquake in Japan, which disrupted the global supply chain for components, didn't create orders for Chinese parts makers but instead boosted demand for competitors in the US, Europe and Taiwan.
Market leadership
"We are just not on the list of many vehicle manufacturers," the engineer said.
Foreign firms supply 100 percent of the automotive fuel-injection engine management systems in China, 91 percent of anti-lock braking systems, 97 percent of micro motors and 69 percent of airbags, according to Chinese media reports.
Some Chinese companies have tried to shortcut the problem by buying foreign auto-parts makers. Earlier this year, AVIC Automobile Industry Holding, a unit of the Aviation Industry Corp of China, bought a majority stake in US auto-steering supplier Nexteer Automotive. It was the largest Chinese investment so far in the US auto-components industry.
Multinational companies have been expanding their investments in China to maintain their market leadership.
Dominiek Plancke, general manager of Dutch-based Philips' automotive-lighting business, said his company plans to expand its Shanghai research and development center because demand is outstripping its capability.
He said the need for advanced lighting parts is especially critical in China because most motorists have been beyond the wheel only four years, on average, and reliable systems are important.
"For China to become a truly strong automaker, we must make the auto-parts sector strong," Wang Songlin, vice president of China National Machinery Industry Corp, said at the Automechanika Shanghai annual trade fair.
The show, held earlier this month, was sponsored by Messe Frankfurt and China National Automotive Industry International Corp, a unit of China National Machinery.
China's auto-parts sector still lags global rivals such as Bosch and Delphi in terms of innovation and technology. Wang called for more government support to help the fledgling development of the domestic industry, which comprises more than 15,000 auto-parts makers.
He also said intellectual property issues are hampering development of the domestic industry.
Large demand
Typically, after four years of owning a car, a consumer's need for parts and services reaches its peak. That means big demand in China, even though car sales are expected to show their slowest growth in 13 years.
Research firm AlixPartner has estimated that China's after-sales market will expand to 652 billion yuan (US$103 billion) by 2014, a sharp jump from 224 billion yuan last year. After-sales services in China accounted for 14 percent of total auto-parts revenue in 2010, it said. The numbers mean China is a sector too large for multinational companies to ignore. At least, that was a clear message at this year's Automechanika Shanghai.
According to data provided by organizers, this month's show broke records, with a 15 percent increase in both exhibitors and exhibition space. The show hosted some 3,600 exhibitors from 36 countries and regions.
In an opening statement, Michael Johannes, vice president of Messe Frankfurt Exhibition, said the trade fair was expecting more than 60,000 visitors from around the world, including buyer delegations from Australia, Indonesia, India, Iran, Malaysia, the Middle East, Pakistan, Peru and Poland. Also in attendance were Chinese delegations from the provinces of Hunan, Fujian and Guangdong, and representatives from leading Chinese car manufacturers such as Beijing Automotive Industry Holding Corp, BYD and Anhui Jianghuai Automobile Co.
China has an auto industry policy requiring foreign vehicle manufacturers to enter 50-50 joint ventures with local companies as part of efforts to assist the development of the domestic carmaking industry.
However, the rule didn't apply to the auto-parts sector, allowing foreign companies to dominate the manufacture of electronic brakes, suspension systems and other components without benefit of domestic link-ups that shared technology with China.
"The market is there, but we just cannot capture it," said an electronic engineer at a Chinese auto parts maker, who declined to identify himself or his company.
"For example, the manufacture of auto-electronic components still needs core technology that few Chinese companies possess," he added.
He said the March earthquake in Japan, which disrupted the global supply chain for components, didn't create orders for Chinese parts makers but instead boosted demand for competitors in the US, Europe and Taiwan.
Market leadership
"We are just not on the list of many vehicle manufacturers," the engineer said.
Foreign firms supply 100 percent of the automotive fuel-injection engine management systems in China, 91 percent of anti-lock braking systems, 97 percent of micro motors and 69 percent of airbags, according to Chinese media reports.
Some Chinese companies have tried to shortcut the problem by buying foreign auto-parts makers. Earlier this year, AVIC Automobile Industry Holding, a unit of the Aviation Industry Corp of China, bought a majority stake in US auto-steering supplier Nexteer Automotive. It was the largest Chinese investment so far in the US auto-components industry.
Multinational companies have been expanding their investments in China to maintain their market leadership.
Dominiek Plancke, general manager of Dutch-based Philips' automotive-lighting business, said his company plans to expand its Shanghai research and development center because demand is outstripping its capability.
He said the need for advanced lighting parts is especially critical in China because most motorists have been beyond the wheel only four years, on average, and reliable systems are important.
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