In the five years since China's accession to the WTO, although China's auto parts industry has not touched people's attention like every vehicle moves, in fact, the parts and components industry is changing as much as the entire vehicle, and more than 70% of multinational component giants are currently present. All have gathered in China.
However, the days of local parts and components companies have not been very good in recent years: On the one hand, the price of raw materials continues to rise; on the other hand, the entire vehicle price war started in 2004 has caused many vehicle companies to pass part of their cost pressures to parts and components companies. In addition, the strong competition of multinational giants has made many local parts and components companies difficult to survive. Statistics in 2005 showed that China’s parts and components industry’s first-ever profit decline in 10 years.
In 2006, the survival environment of local parts and components companies did not improve. Not only did they try to overcome the original difficulties of independent development capacity, low industrial concentration, and exclusion from the closed interest system of vehicle joint ventures, but also faced three new issues. Strong challenges caused by strong invasion.
First, powerful domestic raw material companies have begun to engage in the parts and components industry. Some of the major raw material manufacturers in China have begun to produce their own auto parts and use their material cost advantages to compete with competitors and seize the market. In June 2005, Baosteel announced that it would fully enter the auto parts industry, with the production of wheels, bodywork, power transmission systems and chassis systems as the core, and strive to make Baosteel auto parts enter the top three in the same industry in China by 2010. The domestic auto parts industry is in the early stages of industry consolidation and reshuffling. The market concentration is not high, and the technology grade and scale effect are not high, making raw material suppliers such as Baosteel have the opportunity to obtain a share of the auto parts market. However, the auto parts production of the three major auto groups occupies a large market advantage, and the outsourcing of foreign parts production is gradually increasing. These undoubtedly increase the difficulty of such raw material companies as Baosteel in getting involved in the auto parts industry. In addition, the lack of high-end auto parts development capabilities, lack of a sound management system, and talent support are also barriers that Baosteel and other raw material companies cannot easily bypass. It can be expected that Baosteel must achieve greater development in the parts and components industry, and it will take some time to accumulate experience in industrial talents and industry management. This has left some breathing room for some of the current parts and components companies. However, if Baosteel begins to use mergers and acquisitions to speed up the development of its parts and components business, the only remaining breathing space is probably too little.
Second, IT giants have also begun to enter the auto parts industry. In 2005, Lenovo took the lead in the auto parts industry, followed by Microsoft, Motorola and other international IT giants have also expressed their desire to enter the auto parts market. In fact, the future development trend of the auto parts industry has indeed given these IT giants the foundation for a “car dreamâ€. In the current automotive industry, electronic systems can account for 70% of the total cost of a limousine and 30% of the total cost of an ordinary car. It is predicted that the future development of the world's auto industry will fall into the automotive electronics, intelligence, networking technology and applications. The real goal of the IT giant's acquisition of auto parts companies is to declare war on the vehicle design and initiate a revolution in the standardization of auto parts. If the standardized electronic components are common across different models, the traditional supplier relationship between existing vehicle companies and component companies will be broken, and IT companies will control the right to speak of the next generation of automotive electronic components market standards. Moreover, for IT companies, this is not a diversified operation in a general sense, but an extension of the main business. It is a diversified, multi-centered, future-oriented company.
Third, small foreign companies will share the profits of the domestic spare parts industry in a joint and collaborative manner. In the past, parts and components companies that went abroad to open up markets in China were basically large companies and mainstream companies. However, at present, overseas second- and third-tier enterprises and even smaller ones are prepared to take a bite on the big “cake†in the Chinese market. In fact, these small companies are all bad ones. Even if the large local companies compete with these small companies, they may not be able to prevail. Because they compare with foreign large parts and components companies, although the brand is a little inferior, but in technology, technology, etc., compared with Chinese companies are still very competitive. In addition, compared with Chinese companies, although they do not have a great advantage in terms of cost, they are the common characteristics of these companies. For example, many of them are produced in a joint and collaborative manner. Several small companies form a “honeycomb†organizational structure with precise division of labor and cooperation, effectively maximizing efficiency and minimizing costs. As overseas small companies enter the Chinese mainland market one after another, it will surely pose a new round of challenges for local parts and components companies.
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