--- SEARCH ---
Film in China
War on Poverty
Learning Chinese
Learn to Cook Chinese Dishes
Exchange Rates
Hotel Service
China Calendar
Trade & Foreign Investment

Hot Links
China Development Gateway
Chinese Embassies

Car Parts to Get Larger Market Share

China's auto parts makers are poised to drive away with more of the estimated US$1.2 trillion global components market, helped by low wages and heavy local demand.


Top carmakers such as General Motors Corp. and Ford Motor Co. plan to increase buying parts in China for their global production in the next few years to offset rising costs and cutthroat competition.


China was expected to export nearly US$10 billion in car parts this year, around 16 percent of its output, according to Xinhua. By comparison, its parts exports totaled US$5.63 billion last year, up 73 percent from US$3.25 billion in 2003, the China Association of Automobile Manufacturers said.


The rise of China's parts sector puts added pressure on producers in North America and Europe, which have been buffeted by high raw material costs and production cuts by automakers.


"China is the only country in the world that is a low cost base and also a potential market itself," said Jay Jiang, deputy general manager at Delphi China, a unit of the world's largest auto parts maker, Delphi Corp.


U.S.-based Delphi exports about 20-25 percent of its production in China, and last year shipped about US$200 million in China-made parts abroad.


Hangzhou-based Wanxiang Group Co., China's largest privately owned parts maker, exported more than US$100 million worth of its products from China last year, up 60 percent from 2003.


"The prospects for exports are still good in 2005, because global giants are stepping up sourcing in China," Lu Guanqiu, chairman of Wanxiang, said.


Lu, ranked by Forbes as China's fourth-richest man in 2003, estimated overall production costs in China were about 20-30 percent lower than the global average. Wanxiang, which supplies components to U.S.-based Visteon Corp. and Delphi, has been buying up foreign firms such as Universal Automotive Industries Inc. and Rockford Powertrain Inc. to expand its product line.


While exports accounted for about 26 percent of China's total parts and engine production in 2003, they represented less than 0.4 percent of the world's total parts exports for the year, Merrill Lynch said in a recent research report.


Mexico, Canada and Japan are the world's three biggest car parts exporters, each shipping between US$25 billion and US$35 billion worth a year.


The growth of China's car parts sector is helped by government's liberal investment policy. While automakers are limited to 50 percent foreign ownership, there are no restrictions for parts. Other foreign players in China include Germany's Robert Bosch, which aims to quadruple its China sales by 2012 to 5 billion euros (US$3.85 billion).


"Cost advantage plus a less stringent regulatory environment encourage exports of labor-intensive and material-intensive products," the Merrill Lynch report said. Auto parts workers in China earn just US$0.60 to US$1.30 an hour, the International Labor Organization (ILO) said in a recent report. Wages are up to 25 times higher in the United States and up to 30 times higher in Germany, it said.


Many automakers had begun to treat Chinese component costs as the global benchmark for their suppliers elsewhere, the ILO said. Toyota Motor Corp., the world's most profitable carmaker, is looking to trim costs further by making its traditional parts suppliers match or beat China's rock bottom prices.


While the ILO expects China's employment in the vehicle assembly business to rise about 38 percent from 2002 to 173,000 by 2015, it expects the number of workers producing auto parts will more than triple to about 814,000 over the same period.


Car sales in China rose 15 percent last year to 2.33 million units, well off a near doubling in 2003 as credit curbs reduced demand. As the growth in China's auto sales slows, mainland parts makers are expected to step up exports. "Many car and parts manufacturers will have spare capacity, prompting them to export more," said Zhang Xin, an analyst at Guotai Junan Securities.


At the same time, global carmakers eager to cut costs are looking to boost sourcing from China. Parts makers are also shifting production to China, as customers demand lower costs.


GM expects to boost parts purchases in China to US$4 billion in 2009 from US$200 million in 2003, according to Merrill Lynch, while Ford expects annual purchases in China to reach US$6 billion by 2010, or 7-10 percent of its global requirements. Chinese exporters mainly make components for the aftermarket but are increasingly eager to enter into the higher-end original equipment-manufacturing (OEM) sector.


China's largest tire maker, Giti Tire Co. Ltd., which exports about 35 percent of its output, plans to boost capacity by 20 percent a year in the next two years.


"Production costs in China are low but the cost advantage will not last forever, so we will develop our own brand," said Paul Lau, Giti's investor relation general manager.


(Shenzhen Daily February 24, 2005)


China Set for Auto-part Retail Chain
VW, FAW Launch Component Joint Venture
Auto Parts Industry Difficult to Expand
Auto Parts Sales Enter Fast Lane
Auto Parts Stores Take to Road
Leading Auto Parts Producer Reports Business Surge in China
Sino-German Joint Car Parts Venture Operational
Print This Page
Email This Page
About Us SiteMap Feedback
Copyright © China Internet Information Center. All Rights Reserved
E-mail: webmaster@china.org.cn Tel: 86-10-68326688