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Auto Parts Industry Difficult to Expand

While automakers worldwide rushed to attend a closed biennial Beijing auto parts show earlier this month expecting continued dizzying auto growth in the market, China's auto components producers complained about slow growth and being squeezed out by foreign rivals.

"Overall auto production has bright prospects, but auto components businesses are seeing increasingly narrower living space. We're suffering from challenges posed by international competitors," said Tian Yushi, general manager of the FAW Fu'ao auto components company.

Statistics from the Ministry of Commerce show that China's auto components import rocketed by 111.71 percent to US$6.26 billion in the first quarter of 2003, nearly three billion dollars more than the export volume during the same period.

Bolstered by hefty auto growth, the number of engines imported in 2003 alone amounted to 374,000, a jump of 146 percent over 2002.

However, China's auto components companies, long blamed for overlapped industrial capacity building and lack of technological innovation, failed to come up with high value-added innovative products to seize a sizable part of the lucrative market.

In 2003, the sales revenue of China's auto parts industry reached 300 billion yuan (US$36 billion), accounting for one third of the sales volume of the entire auto industry that year.

But foreign brands dominate the auto components market with products with high technological content such as steering gear, brake systems, transducers and other electronic components.

"What China's auto components businesses can really develop by themselves is only stereos and horns," Tian even said.

According to Zhang Xiaoyu, director of the China Society of Automotive Engineers (SAE-China), most Chinese auto components businesses are small in scale and only have a minor R&D investment, which has hindered their technological innovation.

"China's auto parts industry lacks advanced electronic management technology," he said. "We have a long way to go in developing and producing advanced electronic products."

The best way to catch up with foreign rivals is, he said, to introduce advanced foreign technology and cooperate with foreign auto parts businesses while expanding China's own R&D capacity.

Besides, according to the policy for the development of China's automotive industry issued this year, he said, auto parts businesses should actively participate in R&D of auto groups.

"It is a tendency that the development of auto parts should keep pace with or outpace the development of autos," Zhang said. " But China's auto parts businesses have to go through a process of restructuring and reorganization before witnessing real progress."

(China Daily June 28, 2004)

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