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2021

The Development of the Automotive Components Industry

As the foundation of the automotive industry, automotive components are a crucial factor in sustaining the industry’s continuous and healthy development. In particular, the vigorous and rapidly advancing efforts in independent research and development and innovation currently underway in the automotive sector are even more reliant on a robust components ecosystem for support.

　　As the foundation of the automotive industry, automotive components are a crucial factor in sustaining the industry’s continued, healthy development. In particular, the vigorous and rapidly advancing efforts currently underway in the automotive sector—driven by independent research and development as well as innovation—rely even more heavily on a robust components ecosystem for support. The development of domestically branded complete vehicles and technological innovation depend on strong components; in turn, the independent innovation within the components sector provides powerful momentum for the growth of the entire vehicle industry. These two elements influence and interact with one another: without domestically branded complete vehicles, it is difficult for a robust components system to fully unleash its R&D and innovation capabilities; and without the backing of a strong components ecosystem, it will be challenging to sustain the expansion and strengthening of domestic brands.

　　From January to December 2005, all automobile parts and accessories manufacturers in China achieved a total industrial output value of 383,800,952 thousand yuan, an increase of 18.67% year-on-year; realized cumulative product sales revenue of 375,265,815 thousand yuan, up 20.21% compared to the same period last year; and recorded a total profit of 21,462,002 thousand yuan, a decrease of 9.09% from the same period last year.

　　From January to December 2006, all automobile parts and accessories manufacturers in China achieved a total industrial output value of 539,704,996 thousand yuan, an increase of 34.35% year-on-year; realized cumulative product sales revenue of 527,234,933 thousand yuan, up 34.71% compared to the same period last year; and recorded a total profit of 32,605,652 thousand yuan, representing a year-on-year growth of 46.79%. As of the end of December 2006, the number of enterprises above designated size in the industry had reached 6,142.

　　From January to November 2007, China’s automotive parts and accessories manufacturers achieved a total industrial output value of 683,525,503 thousand yuan, an increase of 37.34% year-on-year; realized cumulative product sales revenue of 663,529,269 thousand yuan, up 37.45% compared to the same period last year; and recorded a total profit of 48,487,363 thousand yuan, representing a year-on-year growth of 68.61%. As of the end of November 2007, the number of enterprises above designated size in the industry had reached 7,171.

　　Looking at the industry’s performance from January to October 2010, the automotive parts and components sector continued to see rising total profits, though the growth rate has slowed; both import and export values increased, but imports were dominated by high‑profit, high‑value‑added, high‑tech products such as transmission systems and engine components, while exports were largely composed of labor‑intensive and resource‑intensive goods with low barriers to entry and thin profit margins, including tires and electronic instruments and meters. The downstream vehicle manufacturing industry experienced a period of overcapacity; although it witnessed an extraordinary surge in growth in 2010 thanks to various government stimulus policies, by 2011 both production and sales growth had slowed, and pressure from excess capacity intensified. As a result, the auto parts industry may face significant profit pressures in the second half of the year. The industry is grappling with a major challenge: squeezed at both ends—upstream and downstream—and thus subjected to dual pressures. The auto parts industry is caught between two powerful forces, lacking meaningful bargaining power with either its upstream suppliers or downstream OEMs. Upstream raw materials—including steel, rubber, plastics, and textiles—are ultimately priced according to the fluctuations of bulk commodities like steel, oil, and natural rubber; auto parts manufacturers can only mitigate risk by accurately forecasting trends in upstream commodity prices. Meanwhile, downstream vehicle manufacturers are predominantly large enterprises and corporate groups that enjoy a strong position in their negotiations with parts suppliers, boasting robust bargaining power and the ability to shift cost pressures onto the auto parts industry. Consequently, auto parts companies find themselves effectively trapped in a “sandwich” position—strapped on both ends.