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With the rapid growth of the automobile industry, China's auto parts sector has also evolved through four key stages: initial development, fluctuation, transition, and adjustment. During the early phase, the industry was mainly driven by vehicle production, with a focus on fixed components. However, most component manufacturers had limited production capacity, low technical standards, and struggled with product quality and pricing. As a result, they were only able to supply specific vehicle manufacturers, unable to compete in broader markets or sell to other automakers. At that time, the industry primarily served domestic medium and heavy trucks and light vehicles.
From the mid-1970s to the mid-1990s, the industry entered a more dynamic stage, where auto parts began to develop around整车 (complete vehicles), and competition among component suppliers started to take shape. The government recognized the importance of the automotive industry as a key pillar of the national economy, leading to the emergence of many small and medium-sized component enterprises. However, these companies remained small in scale, with over 80% having sales below 100 million yuan. There was significant duplication in production, with nearly 5,000 component manufacturers operating compared to just 2,000 designated ones. Technical capabilities were generally weak, limiting their ability to innovate or compete effectively.
In the transitional period, from the mid-1990s to 2001, the industry saw improved competitiveness, productivity, and technological innovation. After joining the WTO, China's auto parts industry entered an adjustment phase, marked by increased foreign investment and industrial restructuring. Multinational corporations began entering the market, and by 2003, the number of foreign-invested component firms had nearly doubled compared to the previous year. Today, over 500 such companies operate in China, with most of the world’s top 20 auto parts firms having established joint ventures or wholly-owned subsidiaries.
This influx brought new challenges for domestic companies, who now face greater competition. To survive, many have chosen to partner with multinational firms, restructure, and adapt to global trends. This shift is not just about cost advantages but also involves international division of labor and industry transfer, creating a complex interplay between domestic and global demand.
China’s auto parts industry has become increasingly vital to both the automotive sector and the national economy. Its share of total auto output rose from 24.23% in 1998 to 26.20% in 2002, and is expected to surpass 27.5% by 2003. By the end of 2003, the industry employed over 12.56 million people.
Looking ahead, the industry will continue to align with the automotive sector, with global competition driving changes. Major auto-producing countries show that the parts and components industry develops in parallel with vehicle manufacturing. China’s experience confirms that without strong local component support, vehicle factories cannot operate efficiently, and long-term imports can strain foreign exchange reserves and weaken the industry’s position.
As automakers develop new models, component suppliers can reduce costs, shorten development cycles, and build closer partnerships. This synergy enhances overall efficiency and competitiveness.
Another trend is industrial restructuring through mergers, acquisitions, and strategic alliances. To address issues like fragmentation and inefficiency, the industry must leverage economies of scale, supported by government policies. By focusing on key players with strong technical and product capabilities, the industry can grow into larger, more efficient enterprises.
Additionally, the relationship between parts suppliers and vehicle manufacturers is becoming more specialized, with tighter collaboration among suppliers. Global sourcing and module-based purchasing are reshaping the supply chain, pushing the industry toward a more integrated, global structure.
Technological advancement is accelerating, and business operations are becoming more globalized. With increased exports, Chinese auto parts companies are also facing more anti-dumping complaints and technical barriers abroad. Safety, power, energy-saving, and environmental technologies are becoming essential, and the growing presence of imported vehicles continues to raise the bar for domestic components.
Overall, the Chinese auto parts industry is evolving rapidly, adapting to global trends while maintaining its role in supporting the nation’s automotive growth.