Chapter 6.2: Automotive Components

Liu Baocheng, Professor, University of International Business and Economics, and Che Yanhua, Volkswagen, China

Market overview

China's automotive industry has enjoyed rapid development over the last two decades. Three large-scale automotive enterprises have been established: China First Automobile Group Corp (FAW), Dongfeng Motor Corp (DMC) and Shanghai Automotive Industry ( Group ) Corp (SAIC). They accounted for 44 per cent of the country's total vehicle production and over 70 per cent of the total number of cars . According to the Chinese State Economic and Trade Commission (SETC), over the last three quarters of 2002, these three groups produced a total output value of 231.2 billion yuan, an increase of 34.8 per cent. In the meantime, almost all the multinational OVMs (Original Vehicle Manufacturers) representative of the world '6+3' (ie, six groups: General Motors (GM), Daimler-Chrysler, Ford, Toyota, Volkswagen and Renault; and three independent companies: Honda, BMW and Peugeot) have established their presence in China primarily in the form of joint ventures with Chinese partners . There are more than 600 foreign invested automotive enterprises involving 20 countries and regions . Total committed foreign investment in the automotive sector amounted to US$21billion, with a total registered capital of US$10.6 billion and paid-up funds of US$4.5 billion. More than 300 OE and supplier technology projects are in place.

In 2000, total vehicle output reached 2.07 million with a value of 391.1 billion yuan, an increase of 80 per cent on 1995. Chinese domestic manufacturers still have a dominant role with over 95 per cent of the total market share. Car production rose by 86 per cent to 605,000 units, while motorcycle production rose by 45 per cent to 11.53 million units over the same period. Demand for commercial vehicles >6t GVW exceeded 300,000 units, an increase of 14,000 units.

According to SETC's 2001 report, there were 2,391 automotive enterprises in China by the end of 1999, of which 118 were automobile manufacturers, 546 automotive converters, 136 motorcycle assemblers, 51 engine makers and 1,540 automotive/motorcycle parts and components companies.

Parts and components are the most crucial sector of the automotive industry. The major international suppliers, including Delphi, Alpine, Continental, Robert Bosch and Siemens, see China as one of their strategic target markets. Many have already found local partners in China in order to access local resources and the industry anticipates huge demand in the years following the country's entry to the WTO.