A new report from Business Communications Company Inc. estimates China’s automotive components industry to be worth $28.8 billion in 2004. The report, “China’s Role in World Auto Components Market,” (GB301) forecasts growth to $58 billion by 2009 at an average annual rate of 15%.
Average annual growth rates in the five component categories recognized by the China Association of Automotive Manufacturers range from 13.4% for body and general parts to 20% for electrical systems. The chassis parts and engine parts markets will grow by 14.3% and 15% respectively, according to Business Communications Company. China’s automotive components industry grew at an even faster rate (23.7% per year) between 1995 and 2003, albeit from a smaller base.
Plans for increased automotive components purchasing by vehicle manufacturers and suppliers “are generating rising concerns” among worldwide suppliers in light of China’s low labor costs, and expected improvements in quality. The report says 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 Japanese and South Korean carmakers have also begun joint ventures in China. International components suppliers including Delphi, Bridgestone and Bosch are joining foreign vehicle makers in staking their claims in China, according to Business Communications.
At a current value of $4.3 billion, with $8.7 billion expected by 2009, engine parts present a significant market opportunity for suppliers outside China. Local production cannot meet domestic demand, according to the report. China's export market for chassis parts is expected to grow rapidly, from $14.1 billion to $27.6 billion, due to the country’s labor cost advantage.
Except for some high-end applications, such as safety airbags, China's rate of automotive body parts production is sufficient to meet domestic demand, but China has yet to create large-scale export capacity. In 2003, for example, its exports of body parts amounted to just 15% of its imports. The report estimates that the body parts market will grow from $2.6 billion to $4.9 billion by 2009.
Similarly, Chinese factories have little excess capacity for electrical systems, which are expected to grow from $3.7 billion to $9.3 billion. With a few high-end exceptions, China's domestic production can also meet in-country demand for general parts, a market growing from $4 billion to $7.6 billion.