The 50-year journey of China's domestic auto parts and components industry has revealed four significant development trends. These shifts have not only shaped the industry's structure but also influenced its growth trajectory and global positioning.
**Production Pattern: From "Large and Complete" to Specialized Division**
In the 1950s, China's auto parts sector was in its infancy, with limited capabilities focused mainly on repair parts. The establishment of FAW (First Automotive Works) marked a turning point, as it brought together 86 parts factories for technological upgrades, laying the foundation for an integrated production system. Initially, FAW produced both standard and non-standard components, setting a benchmark for self-reliance.
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 output, numerous small-scale parts manufacturers emerged, resulting in a fragmented, repetitive, and inefficient production model.
After two decades of growth, companies began to embrace specialization. As Zhu Zhongyi, General Manager of Zhucheng Yihe Cheqiao Co., Ltd., explained, "Parts companies must focus on professional production and management, identify benchmarks, and undergo transformation." Companies like Yihe Cheqiao spun off specialized divisions, such as their passenger vehicle axle team, to enhance efficiency and competitiveness.
Today, many parts factories are moving away from the traditional "big and complete" model, embracing more streamlined and focused production methods.
**Market Integration: From Single to Global**
Initially, the domestic auto parts industry was largely oriented toward the domestic market, serving specific commercial vehicle groups or original equipment manufacturers (OEMs). Over time, companies began integrating into broader markets, adapting to changing models and expanding beyond local boundaries.
Since the 1990s, joint ventures and foreign collaborations in sedan and passenger car sectors spurred innovation. Major OEMs like FAW and Dongfeng started separating their parts subsidiaries, allowing them to operate independently and serve multiple clients.
For example, Chengdu Zhengheng Power Fittings, once focused on small cars, shifted its strategy to align with the growing demand for economical vehicles. Today, it supports several domestic brands and has even entered the U.S. global supply chain.
**Development Model: From Dependency to Global Sourcing**
In the past, the Chinese auto market was stable, with predictable consumer demand. Automakers relied on vertical integration, maintaining control over parts suppliers to reduce costs. This led to a fragmented support system where each OEM had its own parts company.
However, in recent years, the industry has embraced globalization. OEMs are now reducing their in-house production, adopting global procurement strategies. They are shifting from buying individual parts to modules, and from local sourcing to international procurement.
Yunnan Xiyi Industrial Co., Ltd. is one such example, supplying major brands like Mitsubishi and Ford. Deputy General Manager Dong Shaojie notes that global procurement is an inevitable trend. Companies must engage in the global cycle, leveraging both domestic and international resources to boost competitiveness.
**Capital Structure: From State-Owned to Diversified Ownership**
Before reform and opening-up, the industry was dominated by state-owned enterprises. After the reforms, private and foreign capital gradually entered the scene. Today, the industry is characterized by a mix of state-owned, private, and foreign-owned enterprises.
Private firms in regions like Jiangsu, Zhejiang, Guangdong, and Fujian have gained prominence, with companies like Wanxiang Group and Zhejiang Wanfeng Auto showcasing strong performance.
Foreign investment has also played a key role, especially in exports. By 2005, over 90 Sino-foreign joint ventures and wholly foreign-owned enterprises were operating in the sector, with billions in investment. Multinational companies have set up high-level parts suppliers in China, further boosting the industry’s global footprint.
Experts suggest that auto parts companies should leverage assets and products to drive mergers, acquisitions, and diversified investments, accelerating restructuring and enhancing independent capabilities to compete internationally.
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