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In October, China's passenger car market experienced a heartening recovery, with sales rebounding and independent brands making a robust comeback. The National Passenger Car Market Information Association noted that the hard work of domestic automakers is beginning to bear fruit, signaling that the most challenging phase for these companies may be behind them. However, the true resilience within China’s automotive sector remains uncertain, particularly concerning the weaker state of core vehicle components. Most independent parts companies are still struggling with basic tasks like mapping and prototyping, leaving them reliant on foreign suppliers and constrained by their limited capabilities. This situation raises concerns about the future of China's automotive industry.
As we all know, automotive parts form the foundation of the industry, directly influencing its development level. While manufacturers focus on assembly, the importance of parts supply in the automotive supply chain cannot be overstated. Interestingly, the profitability of the parts industry often surpasses that of整车manufacturers, especially for critical components. Yet, due to the rapid expansion of China’s automotive sector, there has been an undue emphasis on vehicle manufacturing over parts development. From 1986 to 2009, according to the "China Automotive Industry Yearbook," China’s automotive industry invested a total of 759 billion yuan, with vehicle investments totaling 509.3 billion yuan, while parts received just over 200 billion yuan. This investment ratio is far lower than the 1:1.3 to 1:2 seen in developed nations. Presently, Chinese automakers allocate less than 1% of their budgets to parts development, and industrial policies offer little guidance or support.
Since the launch of the "Automotive Industry Adjustment and Revitalization Plan" in 2009, most policies have focused on subsidies, such as reduced purchase taxes on smaller displacement models, rural vehicle incentives, and subsidies for energy-efficient and new-energy vehicles. These policies primarily target vehicle manufacturers and are often short-term solutions. Their discontinuation post-crisis could result in significant setbacks. Furthermore, the formulation of these policies lacks both continuity and foresight. The consequences of neglecting parts development are already evident, as Chinese brands rely heavily on foreign suppliers for key components like engines, transmissions, and electronic systems. This external dependence means that 60% of the industry’s profits flow to foreign firms, and core technologies remain predominantly outsourced.
Foreign parts giants are rapidly expanding their presence in China. Honeywell recently announced plans to build a turbocharger plant in Wuhan, while Continental opened three new production lines in Changchun for NOx sensors and other advanced products. Similarly, Delphi Packard Electric System Co., Ltd. inaugurated a branch in Chongqing, focusing on servicing major local automakers. Bosch China reported sales of 23.3 billion yuan in 2010 and 24.9 billion yuan in 2011, growing faster than the overall market. Honeywell’s Dai Pengjie predicts the turbocharger market in China will double from 4 million units in 2011 to 8 million in 2016.
The contradiction of being "large but not strong" in China’s automotive industry is becoming increasingly apparent. To transition from a mere assembly hub to a leader, China must prioritize independent R&D, accelerate parts development, and leverage the potential of the new energy vehicle sector. By closing the gaps in critical technologies and catching up to global standards, the automotive industry can achieve a brighter future.