Four-level pattern expects a strong auto parts industry

The 2nd China Auto Parts Industry Chain Development Forum, organized by the China Economic Herald and hosted by World Economic Future Investment Consulting Co., Ltd., recently took place in Beijing. Experts at the event emphasized that while China has established a supportive system for its automotive industry, the auto parts sector remains large but not yet strong. This is evident in two main aspects: first, there is still a technological gap in core components such as electronics when compared to international standards; second, the organizational structure of the industry needs significant optimization. There is a clear need to enhance group development and modular supply capabilities. According to a comprehensive report on the long-term development trends and strategies for China's automotive industry, released by the Department of Industrial Policy of the National Development and Reform Commission in October 2006, domestic vehicle numbers are expected to grow from 30 million to over 100 million by 2010. This would position China among the world’s top four automotive markets, following the U.S., Europe, and Japan. To achieve this “four-level structure” goal, the auto parts industry must also reach the fourth level globally. At the forum, Li Wanli, Director of the Department of Industrial Policy, presented the medium- and long-term development plan for the Chinese automotive industry. The vision includes making China a major automobile manufacturing power by 2010, with domestic car numbers reaching between 85 to 90 million, placing it as the second-largest market after the U.S. By 2020, China’s auto output is expected to account for 25% of global production, with around 20 million units produced and sold annually. Exports, including overseas production, could reach 30%, and auto parts exports could hit $100 billion. The value-added contribution of the auto industry to GDP should reach 3%, significantly boosting related industries and increasing their contribution to the national economy beyond 12%. Experts like Zhang Xiaoyun, Chairman of the China Automotive Engineering Society, expressed confidence in this growth trajectory, emphasizing that the development of the auto parts industry is the foundation for China to become a true automotive powerhouse. Zhang Xiaokai noted that the evolution of the parts industry is key to determining whether China can transition from a large to a strong player in the sector. One visionary idea introduced at the forum came from Zhang Yong, Director of the Early Warning Department at the Ministry of Commerce. He compared the future of cars to that of computers, suggesting that in the future, consumers might be able to purchase individual components and assemble them themselves, much like how people customize computers today. While this idea may seem ambitious, experts believe it is not impossible, especially with breakthroughs in parts technology and standardization. Zhang Xiaozheng, Chairman of the China Association of Automotive Engineers, shared insights from his visits to advanced automotive nations like Japan. He highlighted that many automakers no longer operate their own stamping shops, as specialized parts manufacturers can provide ready-made bodies. This trend underscores the growing importance of modularization and specialization in the auto parts industry. Technological advancement, industrial development, and structural changes in the parts sector are all interlinked. According to the forum discussions, achieving professional production and modular supply requires a focus on technology innovation, stronger collaboration between parts suppliers and OEMs, and improved system integration. Additionally, enhancing related industries—such as materials, equipment, and logistics—is crucial. For example, China still lags behind in high-grade steel sheets, EPDM rubber, and CNC machine tools used in auto manufacturing. Finally, the organizational structure of the industry must evolve. Currently, many parts companies are affiliated with auto manufacturers, but experts suggest they should expand internationally, participate in global competitions, and consider mergers and acquisitions to scale up. As Li Wanli pointed out, the rise of "0.5-tier" suppliers—those offering more modular products—signals a shift in the global automotive supply chain, one that Chinese manufacturers must adapt to. In conclusion, while challenges remain, the path forward for China’s auto parts industry is clear: focus on innovation, embrace modularization, and build a more integrated and competitive ecosystem.

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