Automotive Aftermarket in China to 2009

Auto aftermarket to increase 14.5% per year through 2009

The aftermarket for light vehicle components and parts in China is projected to rise 14.5 percent yearly, reaching \42.1 billion ($5.2 billion) in 2009. The light vehicle parts aftermarket will post dramatic levels of growth in the near future, driven by extremely high rates of new light vehicle sales the market is witnessing. This will also help to provide additional aftermarket parts sales opportunities due to high vehicle content levels and the introduction of new emissions control technologies.

Potential barriers to further aftermarket parts revenue growth include China s continuing lack of a functional used car market with appropriate market-based pricing mechanisms, which hinders replacement parts demand used in vehicle refurbishment. Light vehicle capacity will likely exceed demand in the near term, placing China in the same overcapacity situation as in most other countries worldwide. As a result, some OEMs have already begun to limit future expansion plans in the market. Finally, the rampant counterfeiting of aftermarket parts could limit growth in China s legitimate parts aftermarket going forward.

Mechanical parts to remain largest product category

The largest product category in China s light vehicle aftermarket is mechanical products, which include engine parts and chassis, drivetrain and suspension parts and components. Demand for electronic controls and modules will be strong, as will continued demand for autosound equipment. Replacement rates for electrical, exterior and structural parts will also experience robust growth going forward.

Parts demand for light vehicles to benefit from smaller farm vehicle market

Most light vehicle demand occurs in large cities near China s coast, where incomes are higher. Lower income rural areas have created strong demand for low-cost farm vehicles suitable for the short distance conveyance of passengers and cargo. This industry has been largely separate from the light vehicle industry, both in terms of new vehicles and aftermarket parts and service. However, new licensing and tax policies are causing increasing numbers of farm vehicle owners to abandon them for light trucks. Therefore, demand for aftermarket parts in China s farm vehicle market is expected to increase at a slower rate than for light vehicles.

Small DIY segment to post strong gains

The dominance of professional service providers will remain throughout the forecast period, with service providers aligned with light vehicle producers capturing greater market share. The do-it-yourself (DIY) segment of the aftermarket is tiny, but will grow strongly as China establishes a true used vehicle market.