The auto parts industry of China is viewed by their government as one of the nation’s pillar industries. Not only is China the world’s largest market for vehicles, with over 28 million units sold per year, between 200,000 to 300,000 cars are imported from the U.S. to supplement demand.
Since 2013, the auto parts manufacturing industry in China has grown by 8.2%. This growth has allowed the industry to achieve revenues of $722 billion per year. The number of firms associated with the industry has grown by 1% over that time, with direct employment opportunities growing by 3.6%.
Over 200 million vehicles are currently being used in China, with that number expected to grow rapidly as government reforms allow for the middle class in the country to continue expanding.
The issue for the industry, however, is that the subsidies offered by the Chinese government to their domestic auto parts industry may violate obligations to the World Trade Organization. Performance requirements are also placed on foreign investors, with a requirement to transfer technology to local partners. This structure has helped China grow, but at the expense of global trade, and they still haven’t reached #1 status in the industry despite all this.
Important China Auto Parts Industry Statistics
#1. In 2014, there were $2.5 billion in U.S. auto parts exports that were directed to China, which was an increase of 13% from the year before. In comparison, China exported $16 billion in auto parts during the same time period. (U.S. Department of Commerce)
#2. Light vehicle sales in China are expected to increase by 7% per year, with 25 million units sold annually. SUVs are the fastest-growing segment in the country, however, representing 28% of the market. (U.S. Department of Commerce)
#3. About 4.2 million vehicles are produced in China each year. Plug-in hybrid vehicle production is a small part of the industry, with just 27,000 vehicles produced each month. (Statista)
#4. The average car age in China is 4.5 years, which has increased the demand for aftermarket parts and services from the industry. (U.S. Department of Commerce)
#5. Total Chinese auto parts imports totaled $45.7 billion in 2015, with over 145 million total vehicles in operation. (U.S. Department of Commerce)
#6. Despite the trade gap for their respective auto parts industries, the U.S. experienced export growth of 154% when working with their Chinese counterparts. (U.S. Department of Commerce)
#7. Over 20 foreign automakers are producing vehicles in China, including American companies like Ford and General Motors, which have a combined 12 joint ventures there. (U.S. Department of Commerce)
#8. In 2013, the Chinese after-sales market generated $73 billion in revenue, whereas the U.S. after-sales market generated $131 billion in revenues. (U.S. Department of Commerce)
#9. Private enterprises stand out as industry leaders for auto parts, with foreign-invested enterprises from Macau, Hong Kong, and Taiwan seizing a 45% market share. Over 6,400 private enterprises operate in this industry, accounting for more than half of all firms. (Deloitte)
#10. Despite the increases in sales for the industry, the structure of the retail side is small, weak, and scattered. The average firm which sells auto parts in China generates revenues of RMB 70 million. Of the top 100 auto parts suppliers in the world, none have come from China so far. (Deloitte)
#11. In 2010, Weifu High Technology had the largest profit margin for the industry at 24.95% on operating income of RMB 5.3 billion. Fuyao Glass Industry Group was second, with a profit margin of 21.01% on RMB 8.5 billion. Guangdong Julun Mould Co. Ltd. was third, with a margin of 18.6% on RMB 569 million. (Deloitte)
#12. In China, fewer than 43% of the auto parts suppliers which are currently active in the industry hold patents. Only 1 in 5 suppliers within the industry actually holds an invention patent. (Deloitte)
#13. 80% of the applications for technology patents within the auto industry are on utility model instead of on invention. Foreign-invested enterprises and joint ventures hold a 70% market share for engine management system technologies, ABS systems, airbags, air-condition systems, automatic transmissions, lighting systems, and other critical components. (Deloitte)
#14. From 2000 to 2010, exports from the China auto industry increased by more than 900%. Part of the reason for this massive expansion was because of $27.5 billion in subsidies that the government provided the industry over that decade. (Economic Policy Institute)
#15. In 2010, the import of tires and auto parts from China exceeded exports of the same products to the country by 725%. (Economic Policy Institute)
#16. Michigan is the most vulnerable state in the U.S. from a jobs standpoint as the Chinese auto parts industry continues growing. Almost 250,000 jobs are believed to be vulnerable. Both Ohio and Indiana see over 130,000 jobs being vulnerable, while Illinois expects about 98,000 jobs to be vulnerable. (Economic Policy Institute)
#17. Volkswagen is the best-selling brand in China, accounting for 3.1 million passenger car sales in 2017. Honda follows in second, with 1.4 million units sold. Geely Auto is third, with 1.2 million units sold. (Auto 163)
China Auto Parts Industry Trends and Analysis
China has invested over $18 billion to support growth in the auto parts industry of 35% or more. The country is currently ranked third for original equipment and third for aftermarket parts.
2016 was the first year of the 13th 5-year plan implemented by the Chinese government to stimulate growth and make structural adjustments to a variety of industries. Through previous efforts, China came to become the home of almost every leading auto parts manufacturer in the world today. It is a large exporter of audio products, glass, and automotive tires for the global auto parts industry.
From 2010 to 2015, the industry experienced a CAGR of 30%. Total output in the overall automotive sector reached 40%.
Although growth will slow from the previous 5-year plan, continued growth is expected. Demand for engine parts in the after-market is especially strong. An aging fleet will support domestic revenue increases, while a growing demand for affordable auto parts will set the stage for future export growth.