China’s growing auto parts industry – could do better?

just-auto’s research estimates that the Chinese parts and accessories market is growing at an impressive 15% a year. Some 80% of that market is accounted for by OE supply to local vehicle manufacturers.

China is still the land of opportunity for the global auto industry - for vehicle makers and component companies alike.

But it is also fraught with problems, and although labour costs are still the lowest on offer, China perhaps does not represent the best option for companies looking to source from low-cost countries.

The report notes that research and development (R&D) capabilities among Chinese component companies are very weak, with many spending less than 2% of their budget on R&D compared to a typical figure of 5-10% among foreign companies.

Global sourcing from Chinese suppliers is also fraught with difficulties. Quality remains an issue - aside from the most basic mechanical parts, few Chinese companies have the R&D capability to engineer complex parts - though the larger local suppliers are starting to develop these skills. Some are even opening local offices in Europe and North America to help communications. In any case it would seem essential to have a representative office in China in order to keep closer contact with suppliers.

The issue of intellectual property rights also has not gone away, just-auto says. China may have moved past outright design piracy of entire cars, but design theft of components is still rife, appears to be culturally acceptable, and is almost impossible to police.

And despite the low labour costs, other Chinese costs are not so advantageous, according to just-auto’s research.

The full just-auto.com report, ‘The Chinese automotive components industry’ is available from
http://www.just-auto.com/store/product.aspx?ID=53208&lk=rotw_store