A Report on the Development Trend of China's Auto-parts Industry (IX)

Part IX: A number of local suppliers of auto-parts below the assembly market segment will pose global challenges.

According to Gasgoo.com's interviews and survey, nearly 60 executives of auto-parts manufacturers and auto industry experts at home and abroad have shared the view about four possible scenarios of the survival and development of China's local auto-parts makers.

1. As mentioned in Part VIII of this report, China's local makers of auto parts are unlikely to become world-leading suppliers, but it is possible for a few companies to develop as the embryos of global suppliers.

2. A large number of small- and medium-sized manufacturers will still focus on the local OE market and it is now hard to foretell their fate. They may fare well before the market becomes mature, and even some of them will develop into medium- and large-sized companies, but their global competitiveness will remain mediocre.
        
3. Many auto-parts suppliers will also specialize in export and some segments of the home market, and some of them will occupy some positions in the global aftermarket, mainly some consumables; more will stay in the middle and lower reaches of the global aftermarket supply system.

4. It is heartening that some local manufacturers will become a crop of auto-parts suppliers who will be oriented to tier-2 and tier-3 OEM products (with a few to the tier-1 OEM products) and they will create global competitiveness. They will be able to gain large market shares in the home market and, by using global sourcing, also enter the global OEM system to build a global operation system finally. In this way, they can export and meanwhile set up their global systems of production, sales and services to rank among the top 3 suppliers in a certain market segment.

As to the fourth scenario, we think Chinese suppliers have great opportunity to achieve it, because there are three decisively useful factors behind them:

1. The enormous size of China's local market;

2. Their tier-2 and tier-3 OEM products are most likely to be the products of global sourcing, and there are huge external demands;

3. Thanks to some favorable factors in China, their major rivals will be local manufacturers and potential competitors from some emerging markets suck as India, rather than global giants and foreign joint ventures, so the competition will be less fierce.

The key to achieving these goals is not necessarily the world-leading technology, but the corporate strategic capability and corporate management capability. Specifically speaking, they should do something like these:

1. To seize the opportunities to expand and diversify their customer bases, not satisfied with the current achievements, and to be visionary enough to know the demands of customers;

2. To improve the management ability and quality control to raise the customer reliance on your products; to be globally excellent in the cost control; to be as good as world-leading companies in logistics, communication, services and other fields. However, it is also necessary to meet the expectations of customers in research and development (R&D) capabilities.

Related:

A Report on the Development Trend of China's Auto-parts Industry (I)

A Report on the Development Trend of China's Auto-parts Industry (II)

A Report on the Development Trend of China's Auto-parts Industry (III)

A Report on the Development Trend of China's Auto-parts Industry (IV)

A Report on the Development Trend of China's Auto-parts Industry (V)

A Report on the Development Trend of China's Auto-parts Industry (VI)

A Report on the Development Trend of China's Auto-parts Industry (VII)

A Report on the Development Trend of China's Auto-parts Industry (VIII)