Trends in China’s automotive component manufacturing industry
China's automotive components sector is set to achieve annual growth of 20 per cent for the next five years driven by demand for new cars and a growing secondary market. The aftermarket segment will become the main outlet for automotive parts as the average age of vehicles on the road continues to rise and the current total car population has already surpassed 100 million. The counterfeit auto parts market, already the world's largest with a current value of about US$40bn, will only increase as the overall market grows.
Market drivers, manufacturer overview, and intellectual property protection issues
In 2013 sales of new vehicles surpassed the 20 million mark in China and new vehicle sales will continue to drive demand for automotive components.
The independent aftermarket* will soon start to grow substantially given the rising number of cars no longer covered by manufacturer warranties.
As used cars become a more viable option for first time buyers, increased government scrutiny of the developing sales network will positively impact the independent aftermarket.
Based on these strong fundamentals, China’s component manufacturing industry is expected to experience growth of more than 20% per year for the next 5 years.
While the outlook remains positive, the central government has identified over-capacity as a potential threat for the industry and has put it under observation since early 2012.
Counterfeiting will increase as the market expands and continue to threaten manufacturer’s profits, requiring parts makers to implement stringent intellectual property protection practices.
Exporting products remains challenging, especially for domestic component manufacturers, due to a lack of technology development and low competence in exporting high value-added products.
Ongoing pressure from rising labour costs and the expected appreciation of the yuan will continue to challenge exporters of low value components.
*The independent aftermarket refers to the independent non-OEM aftermarket
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