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At the recently concluded "High-level Forum on China's Auto Parts Development Trends," Zhang Xiaojie, Vice President of the China Federation of Machinery Industry, provided an insightful overview of the automobile and auto parts industry's development during the "10th Five-Year Plan" period. He also shared his vision for the future, predicting that the automotive component industry will move toward a zero-emission and highly innovative direction.
The "Three Threes" Summarize the "Tenth Five-Year Plan"
2005 marked the final year of the "Tenth Five-Year Plan," and various sectors were reflecting on their progress over the past five years. Zhang Xiaojie used the concept of the "three threes" to summarize the achievements of the auto industry during this period.
The first "three" refers to the rapid growth of the three digital automotive industries, which completed their goals three years ahead of schedule. Over five years, production nearly tripled, and China’s local production ranking rose from eighth in the world in 2000 to third by the end of the plan period.
The second "three" highlights three major transformations within the industry: First, the auto sector was among the first to operate under market-driven norms, with product output, pricing, and market orientation largely determined by the market. Second, after several five-year plans, the industry transitioned from technology dependence to self-reliance in R&D. Third, the auto trade shifted from being import-only to a balanced import and export model.
Zhang Xiaojie noted that when China joined the WTO, the auto industry was once seen as one of the most vulnerable sectors. However, within five years, Chinese automakers had fulfilled all WTO commitments, marking a dramatic shift in confidence and capability.
Despite these achievements, he acknowledged some shortcomings during the "Tenth Five-Year Plan." These can be summarized into three areas: lack of independent innovation, absence of strong industry groups, and challenges in financing and capital operations. For example, many companies relied solely on internal profits for growth, but this approach is no longer viable in today’s fast-paced financial environment. Therefore, new forms of capital integration are essential.
Component Innovation Drives Automotive Advancement
At the recent National Science and Technology Conference, General Secretary Hu Jintao emphasized the goal of building an innovative country by 2020, making science and technology a cornerstone of economic and social development. This has placed greater strategic demands on the automotive industry.
Zhang Xiaojie pointed out that the National Medium- and Long-Term Scientific and Technological Development Plan highlights equipment manufacturing and the information industry as key drivers of national competitiveness, with the auto industry being a central part of transportation equipment manufacturing.
The plan also emphasizes that enterprises should lead in innovation, guided by market demands, while focusing on original research, integration, and absorption. Zhang believes that for a long time, the strategy for the auto industry—especially the parts sector—will involve digestion, absorption, and innovation.
He stressed that component innovation remains the foundation of overall automotive innovation. China has become a major player in the auto industry, but to become a true leader, four factors are crucial: independent R&D capabilities, a strong parts industry, support from related sectors, and a robust sales and service system. Among these, the auto parts industry will play a fundamental role in the next wave of competition.
Electric vehicles, for instance, require new battery technologies and advanced braking systems, signaling that the component industry will undergo significant changes in the coming years.
Auto Parts Clusters and Grouping Strategies
During the forum, a participant asked how China could develop its auto parts industry through grouping. Zhang Xiaojie responded that clustering and grouping are two levels of concepts. It's not just about forming group companies around a few parts manufacturers. True grouping takes time and requires more than just size. Instead, it involves strategic market segmentation and collaboration, which may be a viable path for China to achieve global competitiveness.
In China, there are three main types of auto parts clusters: first, factories located near main engine plants to improve logistics efficiency; second, clusters based on related components; and third, modular supply chains that reduce costs and enhance efficiency. Zhang believes the third type holds the most potential for the development of Chinese auto parts companies.