Exploring the Survival Status of China's Domestic Parts and Components

The auto parts sector is showing a strong recovery, mirroring the broader automotive market's performance. Since the start of this year, domestic auto parts sales have been on an upward trend. As of July 22, among the 23 listed auto parts companies under the Shenwan Industry Classification Group, 17 saw their stock prices double from the beginning of the year, representing over 80% of the industry. This reflects a positive shift in investor sentiment and company performance. Lu Lei, an analyst at Great Wall Securities, notes that the second-quarter earnings rebound of auto parts companies aligns with the rhythm of the auto market. He explains, “In the first half of 2009, passenger car sales grew by 25.6% year-on-year, while sedan sales increased by 22%. Starting in April, mid- to high-end passenger car sales began to recover significantly. Since most domestically listed auto parts companies focus on these segments, this recovery has led to a surge in orders for suppliers, boosting their revenue and profitability.” The global economic environment has pushed foreign automakers to explore the Chinese market more aggressively. Dr. Chen Yilong, former chief scientist at General Motors China, highlighted the challenges facing the U.S. auto market. “The main issue is the high cost of vehicles, which has affected the three major U.S. automakers,” he said. “The U.S. market has shrunk dramatically, with vehicle sales dropping from 16–17 million to around 9 million at its worst. This has led to reduced production globally.” In response, U.S. component manufacturers are seeking government support through various channels. China’s auto market remains one of the world’s largest, driving global automakers to expand their production and parts manufacturing capabilities in the country. For instance, New GM moved its regional headquarters out of the U.S. and established an international operations department in Shanghai, signaling a strategic shift toward China. According to Ding Lei, Shanghai GM sources about 60–70% of its parts locally, with the rest coming from global suppliers. Even with some U.S. suppliers being suspended due to GM’s bankruptcy protection, the company has secured alternative supply chains to ensure smooth production and after-sales services. Denso, a leading Japanese auto parts supplier, is also increasing its presence in China. Its general manager, Yamada, stated that Denso aims to grow its market share from 5% to 20% by expanding its distribution network. The company plans to increase its service stations from over 600 to more than 2,000 by 2010, further solidifying its position in the market. With the international market struggling and China’s auto sector performing strongly, multinational parts companies are investing heavily in the region. This has intensified competition between local and foreign suppliers, putting pressure on domestic firms. Despite improvements in technology and management, China’s auto parts industry still faces significant challenges. Chen Guangzu, a member of the China Automobile Industry Advisory Committee, identified key issues: weak R&D capabilities, small scale, disorderly competition, and lack of long-term collaboration with automakers. He explained that the industry has evolved through three stages, with foreign companies now dominating the supply chain. Many local suppliers struggle to gain access to these systems. Experts suggest that Chinese auto parts companies should focus on improving product quality, investing in R&D, and enhancing innovation to build core competitiveness. Cost reduction and better resource utilization are also crucial for long-term survival in a competitive market.

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