Joint venture will become the main force of auto parts market

"The surge in the entire vehicle market is bound to generate a huge parts industry market." This is the prediction of the Chinese auto parts market after the development of China's auto market in 2010. Therefore, China's huge spare parts market has attracted the eyes of domestic and foreign auto parts industry. According to the latest data from the Ministry of Commerce, foreign capital controls the majority of China’s auto parts market share, and domestic sales of parts and components only account for 20%-25% of the entire industry. With the declining production and sales of the automotive industry this year, the development of the auto parts industry will inevitably take a large-scale path. Most overseas auto giants have already cultivated auto parts joint ventures in China and have extended to the upstream of the industry chain. Therefore, it will be a long period in the future. In the meantime, the joint ventures will become the dominant force in the Chinese auto parts market.

The ongoing “2011 China Auto Industry” campaign has entered the preliminary evaluation stage. Gasgoo.com has found in its survey of more than 800 auto parts companies that the joint venture accounts for about 50% of the total number of applications. And the joint venture’s market share in airbags, ABS systems, three-way catalytic converters, automatic sunroofs, air conditioning systems, car seat assemblies, lighting systems, automatic transmissions, high-pressure fuel pumps and other systems and components is increasing year by year. Improvements, technical R&D, and talent deployment are slightly better than those of local component companies.

In view of the current development of the parts and components market, joint ventures will become the main force in the future market for the following two reasons:

First of all, China's spare parts market has great potential, and its production cost advantage is destined for foreign giants to seize the Chinese market, cultivate their own joint venture component companies in the Chinese market, and lay out components industry in advance.

Secondly, local companies are still in the early stage of development in terms of technology and capital, and there is still a big gap compared with foreign advanced enterprises. Therefore, foreign technology and capital injections are needed to have a foothold in market competition. At present, the proportion of domestic-funded large-scale auto parts enterprises is less than 1% in the whole industry, and large and medium-sized enterprises are also less than 15%, and 90% of the market share and manufacturing capacity of domestic-funded parts and components companies are concentrated in low-end products. Therefore, the joint venture has become the primary way for local companies to seek development.

The joint venture has, to a certain extent, promoted the development of China's parts and components industry. Therefore, before China's parts and components market becomes truly mature, it will inevitably experience a long period of time when foreign capital, joint ventures, and local companies coexist. With the large-scale development of the market, the merger and reorganization of enterprises will be unavoidable. The reshuffling of the parts and components market is also a general trend. Therefore, how to break through in the competition, how local companies can break the monopoly of foreign capital joint ventures will be an important issue for the automotive industry in the future.