Chinese-made Auto Components Consumption to Reach $58 Billion By 2009

During the period from 1995 to 2003, China's automotive components industry made great progress. The average annual growth rate (AAGR) was 23.7%. Given anticipated growth of the Chinese market, the country's low labor costs, and expected improvements in quality, there have been numerous press announcements regarding plans for greatly increased Chinese automotive components purchasing by vehicle manufacturers and suppliers. These claims, along with China's growing competitiveness, are generating rising concerns by worldwide suppliers and manufacturers.

According to a published report China's Role in World Auto Components Market   from BCC Research (www.bccresearch.com), the Chinese auto components consumption was $28.8 billion in 2004. Expected to grow at an AAGR of 15%, this market will reach $58 billion by 2009. According to classifications of the China Association of Automotive Manufacturers(CAAM), auto components are placed into five categories, namely, engine parts, chassis parts, automotive body, electrical systems and general parts.

In the engine parts sector, China's local production cannot meet domestic demand due to a lack of competition. In terms of value, the import of engine parts has been a major category within the importing of all auto components. Based on the introduced technologies and cooperation with foreign companies, China is gradually strengthening its capacity. Expected to grow at an AAGR of 15%, this sector will reach $8.7 billion by 2009.

In the chassis parts sector, the manual transmission and automatic transmission are the largest of all chassis parts being brought into the country, in term of value. Except for these two parts, China's competition is strong with regard to other parts, due to their low technology requirements. In the future, China's export will grow rapidly due to its labor cost advantage. This sector is expected to reach $27.6 billion by 2009 as it grows at an AAGR of 14.3%.

In general, China's production of body parts can meet domestic demand except for some high-end markets. For example, the safety airbag has been a large import item. At present, China has not formed a large-scale export capacity. In 2003, its total exports of body parts represented only 15% of all imports. Expected to grow at an AAGR of 13.4%, this sector will reach $4.9 billion by 2009.

Except for high-end products, China's local production of electrical systems can meet domestic demands. Imports of automotive electrical systems are not large, and are only about 50% of total exports in 2003. In the worldwide market, the proportion of electrical parts in a whole automobile is increasing. In China, this sector will grow at the fastest rate, with an AAGR of 20%reaching $9.3 billion by 2009.

China's domestic production can meet in-country demand except for certain high-end products in the general parts sector. Imports of general parts are small when compared with the large domestic demand, and are smaller than the exports. Expected to grow at an AAGR of 13.4%, this sector will reach $7.6 billion by 2009.

As foreign vehicle makers stake their claims in China, so, too, have international components suppliers such as Delphi, Bridgestone and Bosch. Strong demand for vehicles in China has led to a corresponding increase in the level of auto components. American and European components suppliers have been leading the charge, but with Japanese and South Korean car makers setting up recent joint ventures in China, more components players are expected.