Five Major Problems Facing China's Auto Parts Industry
Market News

Five Major Problems Facing China's Auto Parts Industry

China's component industry is developing rapidly and the domestic demand market is huge, but overall, there are still problems to be solved. To improve the innovation of China's auto parts industry, the technical added value of products, the direction and investment of scientific proportion R & D, the coordination of zero-zero relationships, and the standardization of market operations are all important issues that companies need to jointly solve.
Published: May 26, 2020
Five Major Problems Facing China's Auto Parts Industry

China's auto parts industry

As the overall strength of China's auto parts industry has greatly increased, around the complete vehicle support and international markets, China has formed three major parts production in the three provinces of East China, Beijing and Tianjin, the Yangtze River Delta, the Pearl River Delta, Central China, and the Southwest. The gathering place and 12 national auto parts export bases. According to statistics, China has 7975 auto parts enterprises above-designated size, with the main business income of 794.4 billion yuan and exports of 109.2 billion yuan. Almost all parts can be manufactured in China, which can meet China's commercial vehicles, mid-to-high-end passenger cars 80 More than% of the localized supporting requirements for parts and components have benefited from China's reform and opening-up policy.

There are still many fundamental problems in the development of China's spare parts industry that need to be resolved. Improving the technical added value of China's local parts and components products, the scientific ratio of R & D direction and investment, coordinating the relationship between zeros, and standardizing market operations are important issues that Chinese component companies need to solve together.

The industry faces problems that must be broken through

  1. China's local enterprises have weak competitiveness, the low added value of product technology, and low prices. The auto parts market is monopolized by foreign-funded enterprises. Under the circumstance of increasingly fierce market competition, foreign-funded enterprises have also begun to implement low-cost strategies, and their products have developed to low-end markets. The original price advantage of local enterprises is gradually lost, the pressure is increasing, and the market position is declining, and survival will be more difficult. What caused this to happen?
    First of all, there is a big gap in technical strength, and Chinese local companies have not yet mastered the core product technology. The current status of R & D in China's parts industry can be divided into three situations: one is multinational companies that have established R & D centers in China, and they are currently mainly involved in the research and development of new products of Chinese independent brand vehicles; the other is foreign-funded enterprises with manufacturing enterprises in China New product development depends on its foreign parent company; third, most of the product development of Chinese local parts companies are still in the imitation stage, the technical foundation is not solid, and it cannot develop with the vehicle. Most of these enterprises are private enterprises that have emerged in recent years, and they have missed the era of technology introduction. In those years, some companies that introduced technology for supporting cars, to obtain parts technology and capital for new models, further joint ventures with foreign parties, and became foreign-controlled joint ventures, and some went bankrupt due to various reasons.
    Secondly, local parts companies do not have the conditions and opportunities to develop in sync with the entire vehicle. The products of the joint venture are all transferred to China for production after the development is completed abroad, and the development of the whole vehicle of Chinese independent brand enterprises is still in the initial stage, the product research and development strength is relatively weak, the training of the research and development capabilities of parts and the improvement of technology Not obvious. Also, in the process of development or type change, OEMs do not pay attention to the participation of parts and components companies, which is also one of the reasons why the technical level of parts and components companies cannot meet the requirements of OEMs. If this situation of the whole vehicle does not change, Chinese local parts and components companies will lose the ability to develop synchronously with the whole vehicle, and their research and development capabilities and technical level will not be improved.
  2. The matching relationship between the whole vehicle and the parts needs to be adjusted urgently. In summary, there are currently three supporting relationship models in the Chinese auto industry: the European and American model, the Japanese and Korean model, and the Chinese model. In the European and American models, there are a large number of parts multinational companies and strong comprehensive strength. Although they have strong independence, they maintain a close strategic cooperative relationship with vehicle companies. In the Japan-Korea model, parts companies have little independence and maintain a lip-tooth relationship with a single-vehicle company. Although there are differences between the two models, there is one thing in common, that is, there is a very close relationship between parts and vehicle companies. In the so-called Chinese model, the matching relationship between the entire vehicle and parts is unstable, and the two sides are often in a state of the game, and a stable strategic cooperative relationship has not yet been formed, and parts companies are always in a weak position.
    The reasons for the formation of the Chinese model are more complicated, mainly related to long-term business concepts. Some Chinese OEMs have a strong sense of self-consciousness, instead of arranging supporting parts manufacturers reasonably according to their production volume. To control prices and avoid supply risks, there are multiple locations and shop-to-shop ratios; it does not take into account the recovery of investment costs for R & D and tooling of parts and components companies, and let parts and components companies bear the sole responsibility for the suspension or Investment losses caused by type change; unilaterally lowering the purchase price of parts and components, forcing parts suppliers to often choose between price and quality. Many parts companies report that some large OEMs have pressed the purchase price of parts particularly low, resulting in a very small profit margin for parts sales, but because these large companies have relatively large automobile production, parts companies are not willing to discard orders, had no choice but to hide.
    In the way of handling the "problem" parts claim incidents, some OEMs do not specifically analyze the cause of the problem, all of which are compensated by the parts and components enterprises, and include transportation, communication, and other expenses of the OEMs ’claims. The amount is up to more than three times the price of parts, and sometimes parts companies cannot see "problem" parts. Also, due to management loopholes, some 4S repair shops took the opportunity to falsely report the wrong parts and claim profits from them. Although the parts are small, the losses are large. Some parts companies claim that the annual cost is as high as 4% -5% of sales. These phenomena listed above indicate that China's whole relationship is still in its infancy and infancy, and it is an inevitable problem in development. It needs a step-by-step process of understanding, summarizing, and improving.
    The European and American models and the Japanese and Korean models have been in existence for many years, with cultural reasons, but more of a summary of experience, and facts have proven their rationality. At present, the three supporting models are all running in the Chinese auto market and are undergoing market tests. Which model is competitive may not be seen when the market is growing at a high speed? Once the market declines significantly, the superiority of the reasonable model can be to be fully reflected.
    Although parts and components depend on the entire vehicle to develop, today, as energy, environmental, and safety regulations require more and more cars, many technological innovations need to be completed by parts. If there is no stable relationship, parts companies will not Will invest a lot of money for research and development, which in turn restricts the development of the entire vehicle. Therefore, to a certain extent, parts and components determine the fate of the vehicle. Here, we call on vehicle companies to combine their situations, learn from the experience of foreign models, strengthen communication with parts and components companies, adjust relations with parts and components companies, and establish stable and trusting strategic cooperative relations between the two parties. Working together to deal with the "winter" that China's auto industry is going through.
  3. Since the new auto industry policy in 2004 canceled the investment ratio of auto parts companies, China's auto parts industry tends to have a greater tendency of foreign ownership or sole proprietorship. We should have a correct understanding of this. The implementation of the 30-year policy of opening to the outside world has brought tremendous vitality and progress to the Chinese auto industry. We must continue to adhere to the path of reform and opening up, actively learn from the opening to the outside world, and correctly treat competition, opportunities, and challenges. All types of enterprises are competing and cooperating and developing together in a market, and local parts and components companies must live in harmony with foreign companies.
  4. China's auto parts industry has no entry barriers and is the industry with the highest degree of openness and marketization. Since the reform and opening up, a large number of private enterprises have entered the parts industry and become the main force in the parts industry. Although many enterprises are small in scale, decentralized, low in production technology, backward in management, and lack of talent, their history of hard work and the courage to struggle is admirable. Therefore, we must care for them, love them, protect their enthusiasm, and help them succeed. We firmly believe that after the baptism of the market economy, there will be several international group companies in the Chinese parts industry.
  5. Chinese spare parts companies have not worked hard enough to build brands. Compared with self-owned OEMs, there is still a considerable gap between Chinese auto parts manufacturers in terms of brand creation. In terms of brand promotion, the energy and funds invested by domestic parts companies are insufficient. Many companies gave up the latter between being satisfied with their immediate profits and investing their profits in brand building and technological innovation.
Published by May 26, 2020 Source :ciape

Further reading

You might also be interested in ...

Headline
Market News
Global Semiconductor Packaging Materials Market Outlook and Analysis
Wafer-level packaging (WLP) has gained traction over the past decade as the semiconductor industry continues to push for generations of higher-performance chips. Back-end packaging technologies are becoming increasingly important in meeting the demands of low-latency, high-bandwidth, and low-cost semiconductor devices.
Headline
Market News
Sewing Machinery Industry - Analysis of Taiwan, China, Japan, Germany
The cutting bed in the textile and garment industry is rapidly popularized, the automation penetration rate of sewing equipment continues to increase, the acceptance of template machines is improved, and the textile and garment industry continues to move abroad.
Headline
Market News
General Situation and Development of the Shipbuilding Industry
An industrial sector engaged in the construction of hulls, the installation of engines and complete outfitting, and the refurbishment of finished ships.
Headline
Market News
What is the Semiconductor Industry? What Process and Equipment are There?
Taiwan's semiconductor industry is booming, and sub-industries such as wafer foundry, back-end packaging, and testing, and IC design are among the best in the world.
Headline
Market News
Low Orbit Satellite - Development and Innovation of Communication Network Technology
The development of low-orbit satellites has attracted attention from all walks of life in recent years under the development of resources injected by international science and technology companies. Large-scale satellite galaxies, unlike past satellite communication systems, can provide broadband transmission and global connectivity services.
Headline
Market News
What is the Regenerative Medicine Industry Chain?
Regenerative medicine mainly covers tissue and cell repair, stem cell therapy, and immune cell therapy.
Headline
Market News
The Communication Technology of the Internet of Things and M2M has Entered a Period of Rapid Development
The Internet of Things (IoT) is driven by the M2M (Machine-to-Machine) paradigm, which provides the ability to connect anytime, anywhere among many smart devices. Wireless communication makes M2M communication much easier, it has more applications.
Headline
Market News
Distributed Power Energy System - Energy Saving and Environmental Protection Power Distribution System to Protect the Earth
Through virtual power plants, the integration of distributed energy such as renewable energy, energy storage equipment, and backup power has become a new science in energy management. As the proportion of renewable energy gradually increases, to solve the problem of intermittent power supply, flow batteries that can store electricity for a long time have attracted much attention.
Headline
Market News
The Third-generation Semiconductor Materials - The Key Technologies of GaN and SiC
GaN and SiC - The third-generation semiconductor material, has long been widely used in blue and green LEDs and lasers. GaN and SiC have become a must-have technology for many manufacturers.
Headline
Market News
The Development of Smart Sensor Technology and its Application Scenarios
With the rapid development of emerging industries such as the Internet of Things and mobile Internet. Smart sensors are composed of sensing elements, and signal conditioning circuit controllers, and have data acquisition, conversion, analysis, and even decision-making functions. Intelligence can improve the accuracy of the sensor, reduce power consumption and volume, and achieve easier networking, thereby expanding the application range of the sensor and making its development more rapid and effective.
Headline
Market News
What are Light Industry and Heavy Industry?
Industry determines the scale and level of national economic modernization, plays a leading role in the contemporary world national economy, and is the fundamental guarantee for national economic independence, political independence, and national defense modernization. The industry is divided into two categories: The sector that provides means of production is called heavy industry, and the sector that produces means of consumption is called light industry.
Headline
Market News
What is Health Information Technology and Why is it Important?
In the medical information and communication industry, the development of telemedicine technology and services has been accelerated due to the epidemic. Used to describe health information and its secure and reliable exchange between consumers, service providers, governments, quality groups, and insurance agencies.
Agree