The 50-year evolution of China's automotive parts and components industry has revealed four major developmental trends, reflecting the transformation from a fragmented system to a more integrated and competitive market. These shifts highlight the industry's journey toward modernization, specialization, and globalization.
**Production Pattern: From "Large and Complete" to Specialized Division**
In the 1950s, the domestic auto parts industry was in its infancy, with limited capacity focused mainly on repair parts. The establishment of FAW (First Automobile Works) marked a turning point, as it brought together 86 parts factories for technological upgrades, laying the foundation for an independent production system. Initially, FAW produced both standard and non-standard parts, setting the stage for future development.
By the 1960s, the Second Automobile Company was founded, and 29 supporting factories in Hubei underwent similar transformations. However, by the 1970s, due to insufficient national vehicle production, many small-scale parts manufacturers emerged, resulting in a scattered, repetitive, and inefficient production model.
After two decades of growth, companies began to embrace specialization, focusing on core competencies and improving product quality to survive in a competitive environment. Zhu Zhongyi, General Manager of Zhucheng Yihe Cheqiao Co., Ltd., emphasized the importance of professional management and specialized production. His company restructured by spinning off its axle division and expanding export operations, demonstrating the shift towards efficiency and scalability.
Today, many parts factories have moved away from the "large and complete" model, embracing specialized production that enhances competitiveness.
**Matching Market: From Single Market to Integrated Supply Chain**
Initially, the domestic auto parts industry was heavily dependent on the domestic market, serving only a few commercial vehicle groups. Over time, companies began to integrate their supply chains, supporting multiple brands and expanding into international markets.
Since the 1990s, joint ventures and foreign collaborations in sedan and passenger car manufacturing spurred innovation. Parts companies that were once under major automakers became independent entities, aiming to serve a broader range of clients. For example, Chengdu Zhengheng Power Fittings, once focused on small cars, adapted to market changes by optimizing its product structure and entering global supply chains.
This shift not only diversified the industry but also improved technical capabilities and market reach.
**Development Mode: From Simple Dependency to Global Procurement**
In the past, the Chinese auto market was relatively stable, with limited consumer demand driving minimal vehicle model variations. Automakers often adopted a vertical integration strategy, controlling their parts suppliers to reduce costs. This led to a fragmented support system where each OEM had its own supplier network.
However, in recent years, the industry has embraced global procurement strategies. OEMs are now sourcing from fewer system suppliers, moving from individual parts to module-based purchases and from local to global sourcing. This trend reflects a shift toward greater efficiency and cost control.
Companies like Yunnan Xiyi Industrial have successfully entered international markets, supplying parts to major automakers such as Mitsubishi and Ford. According to Dong Shaojie, Deputy General Manager of the company, global procurement is an inevitable trend that requires companies to compete internationally while leveraging both domestic and global resources.
**Capital Structure: From State-Owned Dominance to Diversified Ownership**
Before the reform and opening-up period, the industry was dominated by state-owned enterprises. During the early stages of reform, private and foreign capital gradually entered the market, creating a more diverse ownership structure.
Today, the industry is characterized by a mix of state-owned, private, and foreign capital. Private enterprises in regions like Jiangsu, Zhejiang, Guangdong, and Fujian have gained significant strength, with companies such as Wanxiang Group and Zhejiang Wanfeng Auto leading the way.
Foreign investment has also played a key role in boosting exports. By 2005, over 90 Sino-foreign joint ventures and wholly foreign-owned enterprises were operating in the sector, with agreements totaling nearly $4 billion. As foreign firms establish high-level parts suppliers, the industry continues to evolve, becoming more competitive and globally integrated.
Experts suggest that auto parts companies should focus on mergers, acquisitions, and diversification to enhance their independent development capabilities, secure intellectual property, and better position themselves in the global market.
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