China's auto parts industry is expected to rise after the crisis

Although the slowdown in demand has hit auto parts makers in developed countries, some star companies are in alliance with Chinese auto parts makers to expand their market share in the global auto parts business. In the past, auto parts in China Business was once considered to lack experience and was not enough to become a supplier to global automakers.

As China has gradually emerged as the world’s largest auto market, the market for domestic parts suppliers has also expanded, which has enabled them to form economies of scale. At the same time, Chinese suppliers that have made progress in terms of quality and precision can also expand their scale and acquire underperforming companies at a lower cost, thereby further improving their own technology.

Ohn Parker, executive vice president of Ford Motor Co., Asia Pacific and Africa, said that as an auto parts producer, China is becoming more and more competitive; the overall quality of its products Is constantly improving.

Marcus Hoffmann, member of the management team of Roland Berger Strategy Consultants, said that from 2004 to 2008, the size of China's parts industry has increased by about 30%.

He estimated that the industry's size will increase from about RMB 950 billion in 2008 to 2.5 trillion yuan in 2015, and the proportion of parts and components exported will increase from the current 25% to 30%.

In January, the sales volume of light vehicles in China surpassed that of the United States for the first time. Global auto manufacturers expect that Chinese car sales will increase by 5%-10% this year, which is in contrast with the sharp decline in car sales in the United States, Europe, and Japan. In addition, it is expected that China will surpass Japan this year and become the world’s largest automobile producer.

However, Ashvin Chotai, executive director of Intelligence Automotive Asia, said that in terms of economic size, China is still unable to catch up with Japan.

Thousands of component suppliers in China actually produce all auto parts. In the past, China's auto parts industry mainly produced heavy-duty merchandise components such as crankshafts, but its product range has now expanded to more sophisticated parts such as suspension components.

Zhao Qing, chairman of Wonder Auto Technology Inc. (WATG), said that the company is seeking to launch acquisitions to expand its sales network and improve its technology. Wonder Automotive technology produces automotive components such as generators and starters.

Zhao Qing said that the company hopes to improve its competitiveness in this economic crisis. The funds on the Chinese market are more abundant. The government also supports private companies to invest overseas.

He said that the Automaker technology will supply parts to North American auto companies from this summer, but he has not disclosed the transaction-related companies because of the confidentiality contract. He also stated that the company has become the sole supplier of Hyundai Motor Co. (005380.SE) and Chrysler LLC's Chinese operations and has already cooperated with international customers.

He also said that due to the collapse of large and small suppliers in developed countries in the financial crisis, China will have the most complete industrial chain.

The vehicle technology of Wonder is not the only company seeking to achieve growth and improve technology through acquisition transactions.

According to a study conducted by the consulting company AlixPartners, 40% of the suppliers surveyed expressed interest in launching domestic M&A transactions, and 25% expressed interest in global M&A transactions.

Hoffmann said there are still many well-funded participants in the market. At the moment, they can use very little money to buy good technology.

Of the thousands of Chinese auto parts suppliers, two of the more well-known Chinese auto parts suppliers are Wanxiang Group Corp. and Fuyao Glass Industry Group Co., 600660.SH. Abbreviation: Fuyao Glass), in which the former produces universal joints and bearings and other components. China's auto parts industry also includes some wholly foreign-owned enterprises and some joint ventures between state-owned enterprises and foreign companies, such as Shanghai Automotive Industry Corporation (Group) and Visteon Corp. (VSTN). Established joint venture.

Visteon filed for bankruptcy protection in the United States in May, but in sharp contrast, the company’s sales in China are so strong that it increased its 2009 passenger vehicle sales growth forecast from 4% to 5%. 9%.

Although US suppliers require the U.S. government to provide additional funds of up to 10 billion U.S. dollars, they have seen an opportunity for expansion in China.

Tenneco, a US auto parts manufacturer, said last week that it has established a joint venture with Beijing Hainachuan Automotive Parts Co. to produce an automobile tail emission control system at a factory in Beijing. It is the company's sixth joint venture in China. The joint venture will initially supply components to Hyundai Motor's China operations. In addition, Tenneco also owns a wholly-owned factory in China.

China's auto parts industry is not immune to the global economic crisis. Due to the decline in domestic and foreign demand in the second half of last year, some companies have already withdrawn due to liquidity problems. According to AlixPartners' research, Chinese suppliers’ revenue from exports in 2008 decreased by 10% compared with 2007.

China's parts and components industry will pay more attention to the domestic market this year. Affected by government policies, the domestic market has recovered and domestic market sales in May have increased by 34%.

At the same time, large automakers around the world are importing more and more components from China. Pan Keqiang said that Ford Motor Co., Ltd. and Chinese suppliers signed a supply contract for parts and components. In 2008, the company purchased a total of US$2.8 billion worth of parts and components for shipment to other countries and regions, mainly North America. Although this number represents only a small fraction of Ford's global purchases, it has increased 10 times over the past five years.

China still lags behind developed countries in technology-intensive parts such as fuel injection systems and smart electronics, but analysts say the situation is changing.

Andy Chien, president of Ricardo Strategic Consulting North America, said that many global automakers have either already moved their electronic products business to China or they are likely to do so. He said that the business focus has actually shifted to Guangzhou and the Pearl River Delta region; he also said that the development of patented technology will be the next step for Chinese auto parts manufacturers.

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