In 2007, China's auto parts market ranked second globally, following Japan, and was rapidly becoming a key player on the international stage. According to Mr. Stefano Aver, Executive Director of ALIXPARTNER Consulting in the U.S., the Chinese auto parts industry is marked by three major trends: rapid growth, strong government support, and an increasing share of global procurement. He emphasized that emerging Asian markets, particularly China, have become central battlegrounds for leading auto parts manufacturers and multinational corporations. Many of the world’s top 20 auto parts companies, including Delphi, TRW, and Bosch, had already established offices or investment subsidiaries in Beijing or Shanghai. Delphi, for example, had formed 15 joint ventures in China, producing over 100 automotive components and systems, making it one of the most influential players in the domestic market.
According to a recent report from ALIXPARTNER, the net profit of China’s auto parts sector reached approximately 675 million yuan in 2007, reflecting a 7.2% year-on-year increase. In contrast, profit margins in the U.S. and European markets were much lower—1.1% and 6.4%, respectively. This highlights the growing profitability of the Chinese market compared to traditional Western markets.
What makes this development even more exciting is the rising visibility of Chinese auto parts companies among global automakers. More and more Chinese firms are now being considered for inclusion in the supply chains of major multinational car companies. This trend is expected to accelerate in 2008. In 2007, exports of non-tire and non-glass automotive components reached around $17.5 billion, marking a 32% increase from the previous year.
However, the Chinese auto parts market is not without its challenges. At the end of January, General Motors executives expressed interest in increasing the volume of Chinese-made auto parts exported overseas but also indicated a desire to limit the types of vehicles sourced from China. Meanwhile, GM’s CFO, Henderson, mentioned the possibility of shifting some local production to domestic factories in the future.
Ford has also taken similar steps, planning to assemble dashboards for the Ford Taurus and Lincoln MKS at its Chicago plant starting in 2008. Previously, these parts were sourced from Mexico and China. Additionally, General Motors Asia Pacific President Nick Riley pointed out that as labor and logistics costs rise in China, countries like India and Vietnam may gain a competitive edge due to their lower costs. GM is also considering investing $3–4 billion in the Asia-Pacific region over the next few years, with Indonesia potentially becoming a new production hub.
Domestic risks remain significant. An analysis by Anbang Group highlighted that declining vehicle sales and falling car prices in China pose a serious threat to the profitability of many local auto parts suppliers. To counter this, the report suggested that forward-thinking and capable domestic suppliers should focus on entering the global procurement systems of multinational automakers.
Mr. Stefano Aver noted that mergers and acquisitions are becoming a common strategy for Chinese auto parts companies looking to grow quickly and reduce risk. “About 80% of Chinese auto parts companies have acquisition intentions, and 50% show signs of engaging in international M&A activities,†he said. “2008 is expected to be a landmark year for mergers and acquisitions in China’s auto parts industry.â€
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