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CONTENTS

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April 2014

www.ibisworld.com.cn | 1-800-330-3772 | [email protected]

IBISWorld Industry Report

Auto Parts Manufacturing in China

April 2014

About This Industry ................................. 2Industry Definition .........................................2Main Activities ...............................................2Similar Industries ..........................................2

Additional Resources ....................................3

Industry Performance .............................. 4Executive Summary ......................................4Key External Drivers .....................................4

Current Performance ....................................5

Industry Outlook............................................7Industry Life Cycle ........................................9

Products & Markets ................................. 10Supply Chain ................................................10Products & Services .....................................11Demand Determinants ..................................12Major Markets ...............................................12International Trade........................................13Business Locations .......................................14

Competitive Landscape ........................... 16Market Share Concentration .........................16

Key Success Factors ....................................16

Cost Structure Benchmarks ..........................17Basis of Competition .....................................18

Barriers to Entry ........................................... 19Industry Globalization .................................. 20

Major Companies .................................... 21Wanxiang Group .......................................... 21Beijing Hyundai Mobis Auto Part Co., Ltd. ... 22 Shanghai Huizhong Automotive ManufacturingCo., Ltd. ....................................................... 23United Automotive Electronic Systems Co,.

Ltd. ............................................................... 24Changchun FAWAY Automobile Components

Co., Ltd. ....................................................... 25Other Players ............................................... 26

Operating Conditions .............................. 29Capital Intensity ........................................... 29Technology & Systems ................................ 29Revenue Volatility ........................................ 30Regulation & Policy ...................................... 30Industry Assistance ...................................... 30

Key Statistics ........................................... 31Industry Data ................................................ 31

Annual Change ............................................ 31

Key Ratios .................................................... 32Jargon .......................................................... 32

Auto Parts Manufacturing in China


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WWW.IBISWORLD.COM.CN Auto Parts Manufacturing in China April 2014 2

About This Industry

Industry DefinitionBusinesses in the Auto Part Manufacturing industry in China produce parts, accessories and componentsfor motor vehicles, including motor vehicle bodies, mechanical and electronic components, and parts forelectric motors. These manufacturers supply motor vehicle assembly and replacement part companies (i.e.the aftermarket).

Main ActivitiesThe primary activities of this industry are:

Automobile body parts and accessories manufacturing

Chassis parts and accessories manufacturing

Electric components and parts manufacturing

Engine parts and accessories manufacturing

Other parts and accessories manufacturing

The major products and services in this industry are:

Mechanical parts and accessories Electric motor parts and accessories

Electronic parts and accessories

Similar Industries3724 - Automobile Body and Trailer Manufacturing in ChinaThis industry is engaged in the oiling, inflating, waxing, polishing, paint spraying, cleaning, changing andretailing of auto parts and accessories.

6562 - Auto Parts Stores in ChinaThis industry retails motor vehicle parts and accessories.

7311 - Car Rentals in ChinaThis industry provides short-term (30 days or fewer) and long-term (more than 30 days) rentals ofautomobiles.

3721a - Passenger Car Manufacturing in ChinaThis industry manufactures passenger automobiles.


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Additional Resources

For additional information on this industry:

www.cnautoparts.netChina Automobile Parts Network

www.chinese-autoparts.com

China Auto-parts Information Network

www.caam.org.cnChina Association of Automobile Manufacturers

www.customs.gov.cnChina Customs

www.stats.gov.cnNational Bureau of Statistics China


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Industry Performance

Executive SummaryThe development of the Auto Part Manufacturing industry is being driven by the fast-growing AutomobileManufacturing industry (IBISWorld industry report 3721) and strong growth in the number of automobilesin use across China. In 2009, the Chinese government launched a series of measures to boost automobilesector growth. These measures included reduced automobile sales taxes, direct subsidies to rural

households purchasing automobiles, and the indirect effects of the government's $500 billion stimuluspackage. At the end of 2013, the total number of automobiles in use in China was nearly 137 million; thisnumber is expected to continue increasing rapidly in future years.

China's accession to the World Trade Organization (WTO) in 2001 helped facilitate the development of theautomobile parts and accessories market by encouraging an open and rational market structure. However,membership in the WTO also meant that China had to reduce its tariffs and non-tariff barriers, and openup its service sector. China's Auto Part Manufacturing industry is less efficient compared to those indeveloped countries, and faces increasing competition as the market continues to become more globalized.

In 2014, industry revenue is expected to total $496.3 billion, up 12.5% from 2013. Over the five yearsthrough 2014, revenue has been increasing at an annualized rate of 17.3%. Domestic demand totals $494.1

billion, up 12.3% from 2013. Meanwhile, exports are estimated at $29.0 billion and imports $26.8 billionin 2014. The production of advanced automotive parts is still very limited in China and products such asacoustic systems, automobile special-purpose ICs (integrated chips), high-end sensors, andmicroprocessors are imported from developed countries.

In the next five years, industry revenue is forecast to increase at an average annualized rate of 9.8%,totaling $790.3 billion in 2019. As the technology and the quality of Chinese products improves, andpricing levels remain very competitive, demand from foreign countries will increase steadily. As a result,exports are projected to grow 8.3% per year to reach $43.3 billion in 2019. However, many manufacturers

will suffer under the double pressure of rising raw material prices and the decreasing price of automobileparts and accessories from assembly plants.

Key External DriversThe key sensitivities affecting the performance of the Auto Parts Manufacturing industry include:

Downstream Demand - Motor Vehicle mfgAutomobile parts and accessories manufacturers have a close relationship with complete automobilemanufacturers and are increasingly required to provide complete sub-systems for assembly.

Exchange Rates - Yuan per $USThe appreciation of the yuan makes Chinese exports less competitive in foreign markets, and importscheaper in the domestic market.

Import Taxes (Duties) - Car RetailingFurther reductions in tariffs will lead to greater import penetration. Imports are significant in theaftermarket segment, where substitutes of original equipment prevail.

Industry Systems and Technology - Motor Vehicle and Part mfgTechnology and systems influence production costs and the types and specifications of productsmanufactured.

Upstream Supply - Metal Ore Mining


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Rising raw material prices increase production costs and can squeeze profit if these costs are not passed onto customers.

Current PerformanceRevenue for the Auto Part Manufacturing industry in China has been growing at an annualized rate of17.3% in the five years to 2014. In 2014, industry revenue is expected to increase 14.9% to total $496.3

billion.

Strong growth in the downstream Automobile Manufacturing industry (IBISWorld industry report 3721)drove a significant proportion of revenue growth in the Auto Part Manufacturing industry in the five yearsthrough 2014. The number of automobiles manufactured in China increased at an annualized rate of 16.4%

between 2007 and 2013 to 22.1 million units. Strong domestic demand for cars, as well as increased foreigndemand for the industry's products, will continue to drive industry growth.

Industry performanceIn 2013, the sales volume of Chinese automobiles increased by 13.9% from 2012 to 22.0 million units. In2012, China's automotive market performed weakly with sales growth of just 4.3%. The sales volume ofcommercial vehicles decreased by 5.5% during the year with the slowdown of China's macro-economy. As aresult, industry revenue growth grew just 13.7% over the year.

In 2011, affected by the cancellation of some major preferential policies and a limit on automotivepurchases in large cities such as Beijing, China's automotive market exhibited weak performance with salesgrowth of only 2.5%, down from 32.4% in 2010. Consequently, the Auto Part Manufacturing industry grewonly 16.1% that year, down from 31.4% in 2010.

In 2010, the automotive market in China expanded strongly due to the government's favorable policies andthe industry benefited greatly from surging downstream demand. Output of automobiles totaled 18.3million units in 2010, up 32.4% from 2009. Also, exports increased significantly (35.2%) in the year due tothe recovery of foreign demand. Industry revenue totaled $292.2 billion, up 31.0% from 2009.

At the beginning of 2009, the Chinese government launched a series of measures to boost automobilesector growth. These measures included reduced automobile sales taxes, direct subsidies to rural

households purchasing automobiles, and the indirect effects of the government's $500 billion stimuluspackage. Automobile sales grew strongly over the year. Output of automobiles in China amounted to 13.8million units, up 47.6% from 2008. However, with the industry's exports declining 20.8% in 2009 due to

weak demand in foreign markets, industry revenue increased at the slower rate of 26.4% for the year.

In late 2008, as the global financial crisis spread and the Chinese economy slowed, sales of automobilesdeclined dramatically. However, industry revenue had increased strongly in the first three-quarters of the

year, so overall industry revenue growth was 32.1% for the year.

Industry profitabilityAverage industry profit is expected to be 6.7% of revenue in 2014. Profit levels declined in the past fewyears due to increasing raw material costs and wages. With competition among firms expected to intensify,participants will have to lower prices to retain market share. Therefore, industry profitability is expected todecline in the future.

Exports and importsChina has become one of the largest manufacturers of automobile parts and accessories in the world.Export growth was significant in the past decade, particularly from 2004 to 2007, driven by strong demandin the United States and Japan. Exports have been increasing at an annualized rate of 14.9% between 2009and 2014. However, growth has fluctuated significantly over the period, with a 20.8% drop in export valuein 2009 due to weaker foreign demand, and a 35.2% increase in 2010 due to the recovery in the global


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economy. Exports as a proportion of industry revenue are expected to decline to 5.8% in 2014, down from6.5% in 2009.

Competing imports have increased at an annualized rate of 11.6% during the past five years to 2014. Thedemand for high quality automobile parts in China is still reliant on imports, as domestic manufacturerscannot produce high quality and specialized automobile parts. In 2006, imports increased significantly by28.6%. Over the five-year period, more foreign automobile parts manufacturers moved their productionfacilities to China, bringing with them advanced technologies and the capability to manufacture specialized

auto parts. As a result, import growth has been slower than in the previous five-year period.

Establishments and wagesIn the five years through 2014, there were many new market entries from domestic and foreign enterprises.Foreign players entered the market by forming joint venture companies with local producers, or throughmergers and acquisitions. Mergers between domestic manufacturers have also been occurring. Domesticcompanies have combined efforts to strengthen market positions, increase market shares and enlarge salesnetworks.

Total industry wages have increased significantly during the past five years, at an annualized rate of 22.9%.The average annual wage per employee increased almost double from $5,042 in 2009 to $9,606 in 2014, areflection of the surging labor costs in China.

Technology and economies of scaleAlthough developing strongly, the industry still uses relatively backward technologies. Economies of scalehave not yet been completely developed. There are numerous small players in the industry, and few firmsare large scale with significant market shares.

In some regions of South and East China, a number of family businesses are involved in automobile partmanufacturing. Each family specializes in the production of goods within a single segment or sub-segment.In recent years, several families have combined to form economies of scale and scope, by sourcing productsfrom each other at lower prices and by offering a large variety of products to customers. However, theproduction capacity and technology level of each independent operator is limited.

Furthermore, the production of advanced automotive parts is very limited in China. Products such as

acoustic systems, automobile special-purpose ICs (integrated chips), high-end sensors, andmicroprocessors are still imported from developed countries. Also, costly compound materials, such asaluminum, magnesium, titanium and some advanced plastic materials are generally not used in Chinese-made products.

Research and developmentThe research and development (R&D) ability of domestic manufacturers is weak due to limited capital forinvestment. For this reason, domestic companies often fail to meet the demand and quality requirementsfrom the fast growing Automobile Manufacturing industry. In addition, they face pressure from foreignautomobile part manufacturers operating in China that possess patents and intellectual property rights.

Annual investment in R&D in China averaged between 1.0% and 1.5% of sales revenue over the past five

years. In developed countries, the rate is typically 3.0% to 5.0%, with some enterprises reaching 10.0%.The share of R&D investment in parts and accessories in total income should be 1.2 to 1.5 times that of theshare of R&D in the Automobile Manufacturing industry to offer the required products to downstreamcustomers. By contrast, in China it is less than a third. This severely limits the R&D level and capacity ofthe industry. However, domestic enterprises are beginning to increase investment in R&D to becomeprofessional manufacturers of high-quality products.


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Industry OutlookACMR-IBISWorld forecasts that in the five years to 2019, total revenue of the Auto Part Manufacturingindustry in China will increase at an annualized rate of 9.8% to $790.3 billion. The main drivers of industrygrowth will be steady increases in overall demand for automobile parts and accessories, as well as gradualdemand growth from China's Automobile Manufacturing industry (IBISWorld industry report 3721).

International tradeThe industry's exports are forecast to increase at an annualized rate of 8.3% over the next five years. As

China has become one of largest manufacturers of automobile parts and accessories in the world, exportvolumes will continue to increase strongly, especially, as the technology and the quality of Chineseproducts improves.

However, as a proportion of industry revenue, exports are expected to decrease from 5.8% in 2014 to 5.5%in 2019 due to faster growth in domestic demand.

Competing imports are expected to increase at an annualized rate of 6.3%. As more foreign manufacturerswith the ability to produce specialized and high quality industry products establish factories in China, theshare of imports in domestic demand is expected to decrease from 5.4% in 2014 to 4.6% in 2019.

The number of enterprises is forecast to increase 3.6% per year in the next five years, reaching 5,345 in

2019. Total industry wages, however, will grow at the much faster annualized rate of 10.7% due to higherwages per employee.

Growing downstream demandChina's automobile sector is forecast to maintain high annualized growth levels of 8.0% to 10.0% over thenext 15 years. The Automobile Manufacturing industry in China is projected to grow almost 1.5 times fasterthan China's GDP over the period.

Further separation of the Automobile Manufacturing industry and the Auto Part Manufacturing industry isexpected. At present, some automobile parts and accessories manufacturers belong to completeautomobile manufacturing enterprises in China, which limits the development of the industry to someextent.

Industry globalizationFurther industry globalization will be a major trend in the industry as manufactures expand exportmarkets, while continuing to satisfy domestic demand. China will continue to be one of the largestmanufacturers of automobile parts and accessories in the world.

High penetration levels of foreign capital in the Automobile Manufacturing industry in China will furtherthreaten local automobile parts and accessories manufacturers. Foreign enterprises obtained large marketshares in the passenger vehicle part market in China in recent years. Currently, foreign capital accounts forover 36.0% of China's automobile parts and accessories market.

Foreign enterprises are also the sole market for certain automobile parts, such as high-end electroniccontrols, fuel injection systems, transducers, brake systems, and steering systems. As such, domesticenterprises face increasing challenges from their foreign competitors, and will likely look to improveperformance through mergers and acquisitions.

Increasing competitionEconomies of scale and increased competition will be important industry drivers. At present, there aremany small enterprises that operate at low efficiency levels. Problems caused by small scale, lowconcentration and disorderly competition inhibit the development of the industry, and domesticmanufacturers will have to integrate to complement each other and allocate resources more efficiently.


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It is also important that firms in the industry strengthen research and development (R&D) abilities. Chinahas incorporated some advanced foreign technology, equipment and management systems; however,domestic manufacturers still need to strengthen their R&D ability to manufacture independent products tomeet the requirement of complete automobile manufacturing enterprises.

Profit declines will be a serious challenge as competition between assembly plants and parts manufacturersintensifies. Moreover, many automobile parts and accessories manufacturers will suffer the doublepressure of rising raw material prices and decreasing prices of automobile parts and accessories from

assembly plants. Competition pressure will have a smaller impact on foreign automobile partsmanufacturers in China as they possess patents and unique technology, thus are better able to resist pricecuts.


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Industry Life CycleThis industry is in the growth stage of its life cycle.

Life Cycle Stage Industry value added increased strongly in recent years

There are frequent technology changes and innovations in this industry

New products can be rapidly developed for downstream industries

The Auto Part Manufacturing industry in China is in the growth phase of its life cycle. Industry value addedis expected to increase at an annualized rate of 12.5% between 2009 and 2019, much faster than China'saverage GDP (7.3% per year) over the same period.

The industry's enterprise and establishment numbers are also expected to increase during 2009 and 2019,indicating new market entrants and greater investment in sales network development.

Technological changes and innovations are relatively frequent in the industry. Several foreignmanufacturers that have recently entered the market have established joint ventures with local companiesand brought advanced technologies and management expertise. This has contributed to the developmentof domestic manufacturers and the expansion of their operations.

The domestic market still has unmet demand for high quality automobile parts and accessories. Inaddition, the average usage rate of automobiles remains relatively low, particularly in the central and

western areas in China. Steady usage increases will stimulate further demand for automotive parts andaccessories.


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Products & Markets

Supply ChainKey Buying Industries

3721 - Automobile Manufacturing in ChinaThis industry manufactures complete automobiles and automobile engines using auto parts and

accessories.

3724 - Automobile Body and Trailer Manufacturing in ChinaThis industry manufactures non-drive vehicles towed by motor vehicles using auto parts and accessories.

3726 - Car Repair Services in ChinaThis industry conducts automobile repairs that require automobile parts and accessories.

6372 - Auto & Parts Wholesaling in ChinaThis industry wholesales automobiles and auto parts and accessories.

6562 - Auto Parts Stores in China

This industry retails auto parts and accessories.

3721a - Passenger Car Manufacturing in ChinaThis industry manufactures passenger cars using auto parts and accessories.

Key Selling Industries

3070 - Plastic Parts Manufacturing in ChinaPlastic parts are used in the production of automobile parts and accessories.

3591 - Iron & Steel Casting in China

Cast products are used in the production of automobile parts and accessories.

4061 - Electronic Component Manufacturing in ChinaThis industry supplies electrical equipment and components as inputs for electric motor parts andaccessories.

4121 - Scientific Instrument Manufacturing in ChinaThis industry supplies tachometers, production counters, distance recorders and other instruments andmeters used in automobile parts.


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Products & Services

Electric motor parts and accessories 23.5%

Electronic parts and accessories 22.5%

Mechanical parts and accessories 54.0%

Mechanical parts and accessories

Mechanical parts and accessories make up the main product segment of the industry, contributing 54% oftotal industry revenue in 2014. The majority of automobile components are mechanical parts, including

bearings, filters, covers, brakes and clutches. The price of mechanical parts has increased in the past fewyears due to the rising price of raw materials.

Electric motor parts and accessories

The second-largest industry segment is parts and accessories for electric motors, accounting for anestimated 23.5% of total industry revenue in 2014. This segment includes starting motors, alternators,control units for electronic systems, and mechanical and electronic drivers. Demand for products withinthis segment is relatively steady, and is expected to experience only small proportional increases in the

future.

Electronic parts and accessories

Electronic parts and accessories is the third major industry segment, generating 22.5% of total industryrevenue in 2014. This segment includes engine electronic control systems, anti-lock braking systems(ABS), meters, global positioning systems (GPS), transducers, entertainment systems, and items used inthe control, safety, communication and entertainment fields. This segment will increase in size in line withthe development of China's automobile manufacturing sector and growing demand for high-endautomobiles.


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Demand Determinants

Economic growth levelsChina's economy has been growing rapidly in recent years, and has contributed to strong growth in marketdemand and industry revenue.

The development and expansion of automobile industriesThe Automobile Manufacturing industry in China (IBISWorld industry report 3721) is developing strongly,

creating high growth potential for automotive parts and accessories manufacturers. At the end of 2013, thetotal number of automobiles in use in China was nearly 137 million.

Diversity of downstream industriesDifferent vehicles require different types of automobile parts and accessories. This can stimulate demandfor a wide variety of products manufactured by this industry.

Quality and technology levelsThe development of new technology and the production of high quality products promote demand for theindustry's products.

Government regulations

National and provincial regulations have encouraged the development of the industry. These have focusedon providing a better operating and market-focused environment for the industry.

Major Markets

Direct sales 39.2%

Distributors (wholesalers) 34.2%

Retailers 20.8%

Exports 5.8%

Direct sales

Most of the industry's products are sold directly to end-users through supplier service centers and partsand accessories shops. At present, suppliers strictly control sales of some essential automobile parts, suchas engine and automobile body parts. Customers can purchase these parts only directly from theirsuppliers. This is one of the measures suppliers take to guarantee product quality and avoid the impact ofcounterfeit automotive products on their image.

Distributors


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The second-largest segment is distributors and dealers. Some foreign suppliers have established first- andsecond-tier distributors responsible for automobile part and accessories sales and distribution. Asautomobile production is concentrated in Shanghai, Changchun, Hubei, Beijing, Tianjin, Guangzhou,Chongqing and Harbin, these have become cities with well-developed distributor networks for automobileparts and accessories sales.

Retailers

Retailers are the third-largest market segment in the industry (IBISWorld industry report 6562). Somecities have established retail markets for automobile parts and accessories, such as Beijing West SuburbAutomobile Parts and Accessories Market, Shanghai Oriental Automobile Parts and Accessories Market,and Wuhan Wanguo Automobile Parts and Accessories Market. Customers often prefer to buy productsfrom these markets for the large product range and relatively lower price of parts and accessories.

Exports

Exports are expected to account for 5.8% of industry revenue in 2014. Exports play an important role inthis industry as China is one of the largest producers of automobile parts and accessories in the world.

International Trade

Exports in this industry are medium and steady.Imports in this industry are medium and steady.

Exports

Exports are expected to increase by 10.7% in 2014 to $29.0 billion or 5.8% of industry revenue in 2014.Exports increased strongly from 2006 to 2008 due to expansion and improvements in the productioncapacity of domestic manufacturers. However, exports dropped 20.8% in 2009 due to the global financialcrisis and lower foreign demand.

Over the next five years, the industry's exports are forecast to increase substantially at a rate of 8.3% per

year. The improving manufacturing ability, capacity and technology of China's local manufacturers willdrive foreign demand for automobile parts and accessories produced in China.

According to China Customs, the major export markets for the Auto Part Manufacturing industry in 2013included the United States (30.4% of total exports by value), Japan (10.1%), South Korea (4.7%), Germany(4.3%), and Russia (3.9%). Higher labor costs in these countries resulted in growing demand for Chinese-made auto parts.

Imports

Competing imports are expected to increase 7.6% in 2014 to $26.8 billion, and account for 5.4% ofdomestic demand. In 2013, the major source of competing imports into China was Germany, accounting

for 35.5% of total import value. Other major import markets included Japan (30.0%) and South Korea(13.8%). The imported value of these three countries accounted for 79.3% of total competing imports intoChina in 2013.

China will continue to import automobile parts and accessories as many local manufacturers only operatelow-technology product lines. However, the ratio of imports to domestic demand will decrease, as localmanufacturers develop their facilities and invest in more productive equipment.


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Business Locations

Region Percentage

East China 45.1

Middle South China 26.1

South West China 9.4

North China 9.2

North East China 8.6

North West China 1.6

Region Percentage

East China 49.7



North China 8.1



Region Percentage

East China 46.6



North China 11.2




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The industry's operations are mainly concentrated in the economically well-developed East China andMiddle South China regions. Due to higher per capita incomes, larger populations and higher usage ofautomobiles, many industries in these regions are growing strongly, leading to greater demand for

automobile parts and accessories. Zhejiang, Jiangsu, Shanghai, Shandong, Guangdong and Hubei areestimated to account for about 47.9% of total industry revenue in 2014.

Jiangsu, Zhejiang, Shanghai and ShandongThe industry tends to be highly concentrated in eastern coastal areas because larger firms in these areasare able to benefit from economies of scale and close proximity to imported raw materials and downstreamindustries. Zhejiang, Jiangsu, Shanghai and Shandong are the most dynamic areas in this region. In 2014,these four provinces are expected to account for 39.5% of total industry revenue, with 40.2% of totalestablishment numbers and 36.9% of total industry employment.

GuangdongGuangdong is the manufacturing center of China and households in this region have relatively highdisposable income levels. About 5.5% of industry establishments are located in Guangdong due to the largemarket potential. Revenue generated from this province is estimated to account for 8.4% of total industryrevenue in 2014. The two first-tier cities, Guangzhou and Shenzhen, are the most dynamic areas inGuangdong province.

HubeiRevenue generated from Hubei province accounts for an estimated 6.8% of the total in 2014, with 8.3% ofthe total establishment number. Wuhan is the most dynamic city in this area, and one of the leadingcompanies in the industry, Dongfeng Motor Suspension Spring is located there.


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Competitive Landscape

Market Share ConcentrationThe level of industry concentration is low.

The Auto Part Manufacturing industry in China has a low concentration level, which is expected to remainsteady in future years. Revenue of the top four firms is expected to account for 6.9% of total industry

revenue during 2014. There are a large number of small and medium enterprises operating in the industry,and the market is highly fragmented.

There are many manufacturers that operate on a small scale and are privately owned. The majority of theselack substantial capital, technologies and employees, and only produce single products and spare parts.

The low concentration level also reflects the diverse nature of the industry's products. Firms tend to focuson particular parts or markets, and the majority of enterprises manufacture single products. Only somelarger firms are able to manufacture a wide variety of automobile parts and accessories.

With increased price competition and falling profit margin, ACMR-IBISWorld forecasts that the industryconcentration level will remain steady in the future, despite some consolidation and merger activity.

Key Success FactorsThe key success factors in the Auto Parts Manufacturing industry are:

Successful industrial relations policySecure relationships with downstream firms is a competitive advantage for industry enterprises.

Having an extensive distribution/collection networkHaving effective sales channels can help manufacturers increase market share and revenue growth.

Undertaking technical research and development

Product innovation and expenditure on research and development can be a competitive advantage forindustry firms.

Effective quality controlSuccessful companies in this industry adopt quality assurance techniques and policies to improve theirproducts and processes.

Access to the latest available and most efficient technology and techniquesThe degree of investment in technological improvements and product development can improve theproducts and revenue of firms in this industry.

Establishment of export markets

The development of export markets is important for some firms in this industry.

Understanding government policies and their implicationsUnderstanding the implications of changing government policies is important for new and existing firms.


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Cost Structure Benchmarks

Purchases 62.0%

Wages 5.7%

Management and Administration 4.6%

Rent 3.5%

Depreciation 3.5%

Tax and Interest 2.9%

Utilities 2.3%

Other 8.8%

Profit 6.7%

Profit

Average industry profit is estimated at 6.7% in 2014. Profit levels have been declining over the past fewyears due to increasing raw material and labor costs. However, industry profitability has increased since2009 due to surging downstream demand from automobile manufacturers.

Purchases

The major cost in the industry is raw materials, including iron, steel and machine parts. These are expectedto account for about 62% of industry revenue in 2014. Due to increasing global and domestic demand forraw materials over the past several years, prices have risen substantially, particularly steel prices.

Depreciation

Industry depreciation is expected to account for 3.5% of industry revenue in 2014. This includesdepreciation of buildings, machinery, equipment, office facilities, and vehicles. Depreciation expenses have

been stable, which indicates a steady level of capital investment.

Wages

Another major industry cost is labor, which accounts for 5.7% of industry revenue in 2014. Managementand administration costs account for an additional 4.6%. Although the cost of labor is lower in China thanin other countries, the technology of domestic manufacturers is not advanced. Therefore, firms need largenumbers of employees for production.

Other costs

Other costs depend on the operations of each firm, and may include logistics and transportation, storage,maintenance, subcontractors, insurance, advertising, and other expenses.


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Basis of CompetitionCompetition is high and increasing.Price

A main basis of competition is product price. To keep pricing competitive, automobile parts andaccessories manufacturers have been forced to partly absorb increased production costs due to rising steelprices in recent years

Product quality

Firms that have the ability to manufacture products according to specifications can have an advantage inthe market. Customers generally find a balance between quality and price when choosing equipmentsuppliers. The quality of products is very important for exporting firms and their customers.

ServiceThe ability to provide after-sales service and repairs can be important for customers and can influence the

brands they choose.

Sales distribution channelsCustomers may prefer to purchase products that are supplied via a wide and extensive retail distributionnetwork. This can have a significant impact on costs and competitiveness of manufacturers.

Customer relationshipsThe relationships that automobile parts and accessories firms have with customers are also important toensure that problems are dealt with promptly and effectively. Some large manufacturers have successfullyretained the same customers for several decades by maintaining strong client relationships.

Technical expertiseIn recent years, advances in technology, the use of state-of-the-art facilities, and the retention of skilledand dedicated employees have helped firms in this industry to maintain their competitive advantages.


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Barriers to EntryBarriers to entry are medium and steady.

Barriers to Entry checklist Level/Impact

Industry Competition HighIndustry Concentration Low

Life Cycle Stage Growing

Capital Intensity Medium

Technology Change Medium

Regulation and Policy Medium

Industry Assistance High

SOURCE: IBISWORLD

Investment scale

The need to invest in large and efficient manufacturing facilities can discourage competitors from enteringthe industry. The high costs associated with the construction of facilities are a significant deterrent toentry. In addition, the cost of developing large-scale production is very high.

Technical expertise and knowledge

New firms must have similar or enhanced levels of technical expertise, skilled workers and technology tocompete with existing forms. In particular, the establishment of sales networks and distribution channelsposes challenges for newcomers.

Government and environmental regulations

Due to the hazards, materials, and waste that firms in this industry produce, national and localgovernments require environmental approvals to operate in the industry. These legal requirements areimportant barriers facing a new manufacturer to the industry.

Establishing a good reputation

As some domestic and foreign manufacturers have good reputations and well-known brands, customersmay prefer to deal with these suppliers, which creates a further barrier to entry.


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Industry GlobalizationThe level of globalization is medium and increasing.

The Auto Part Manufacturing industry in China is subject to a medium globalization level, which isexpected to increase in the future.

Many export-oriented domestic companies have emerged in the past decade, which has acceleratedindustry globalization. China has become one of the top countries for automobile parts and accessories

manufacturing in the world.

In addition, several foreign automobile parts and accessories manufacturers have entered the Chinamarket in recent years by establishing factories and joint ventures with domestic firms. This resulted fromstrong domestic demand for high-quality automobile parts and accessories products in China. In addition,foreign firms see strong opportunities for company expansion and development in China. Foreignenterprises are estimated to account for about 41.3% of industry revenue in 2014. With greater levels offoreign investment in this industry in China in the future, the globalization trend is expected to increase.

Enterprises by ownership type (2014)

OwnershipRevenue share

PercentageEnterprise share

Percentage

State Owned 3.6 1.4

Collectively Owned 0.9 1.4

JECE* 0.7 0.7

Shareholding 5.4 2.4

Private 30.3 49.2

Foreign 41.3 24.9

Other 17.9 20.1

SOURCE: ACMR-IBISWORLD ESTIMATENOTE: *JOINT-EQUITY COOPERATIVE ENTERPRISE


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Major Companies

Major Player MarketShare

Wanxiang Group 4.2% (2014)

Beijing Hyundai Mobis Auto Part Co., Ltd. 1.1% (2014)

Shanghai Huizhong AutomotiveManufacturing Co., Ltd.

0.8% (2014)

United Automotive Electronic Systems Co,.Ltd.

0.8% (2014)

Changchun FAWAY AutomobileComponents Co., Ltd.

0.7% (2014)

Other 92.4% (2014)

Wanxiang Group

Market Share:4.2%

Wanxiang Group was founded in July 1969 and is headquartered in Xiaoshan city, Zhejiang province.Currently, it employs over 40,000 workers. The group's main products include universal joints, bearings,and constant-velocity (CV) joints. Wanxiang Group has a manufacturing base covering four squarekilometers, and has strategic partnerships with local factories in Changchun, Hubei, Hainan, He'nan,

Jiangsu, Heilongjiang, and Anhui. The group has 31 companies (including 18 holding companies or otherventures) in 8 countries, including the United States, the United Kingdom, Germany, and Canada.

Wanxiang Group manufactures a large range of products, from spare parts to components and systematictemplate supplies. It sells to domestic and foreign markets, including to customers in over 40 countries,such as the United States, Canada, Latin and South America and all of Europe. The group's products arealso sold to some major automobile manufacturers like GM and Ford. Wanxiang America Corporationprovides full-line customer service to clients in the United States, Canada, and South America. In additionto the automotive market, Wanxiang is also involved in large-scale agriculture, aquaculture, real estatedevelopment, infrastructure development, and other programs.

Financial performance

In 2012, Energy Saving and New Energy Vehicles Industry Development Planning (2012-2020) wasissued, and Wanxiang Group will continue transform from traditional vehicles parts to new energy vehiclesparts.

In August 2012, with $450 million of capital injection, Wanxiang Group obtained 80% stock equity ofA123, a maker of batteries for electric vehicles that received U.S.-government backing. Exports of the grouptotaled $2.60 billion, and company revenue surged to $18.48 billion.


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In March 2011, the first phase of an expansion project was put into operation, which increased the annualproduction capacity of wheel bearings by 2.5 million sets. The project is expected to be completed in 2014,

which will lead to an increase of 10 million sets of wheel bearings in annual production capacity. WanxiangGroup is estimated to account for 4.1% of total industry revenue, making it the market leader.

In 2010, China's automobile market experienced rapid development. Both output and sales of automobilesin China surpassed 18 million units. Surging downstream demand stimulated revenue growth and in 2012,the Wanxiang Group generated revenue of $9.8 billion, up 28.7% from 2009, and reflecting an annualized

growth rate of 26.4% in the period from 2006 to 2010. In January 2008, the Wanxiang Group acquiredAutomotive Components Holdings (ACH) via its US subsidiary Neapco. ACH is the subsidiary of Fordengaged in auto parts manufacturing in the United States.

In July 2007, the Wanxiang Group acquired 30.0% of AI, the top supplier of auto parts for GE, Ford andChrysler. The group enlarged the foreign market share of auto parts by this acquisition. In 2005, the groupmerged with Hubei Tongda Automobile Parts and SP Company (a US company).

Wanxiang Group - financial performance

YearRevenue

US Million DollarsGrowth

% changeEBIT


% changeAssets


% change

2004 1613.6 N/C 93.5 N/C 1038.9 N/C

2005 3078.7 90.8 92.7 -0.9 2057.0 98.0

2006 3829.2 24.4 118.4 27.7 2518.3 22.4

2007 5370.3 40.2 431.2 264.2 3082.6 22.4

2008 6661.8 24.0 N/A N/C N/A N/C

2009 7592.3 14.0 N/A N/C N/A N/C

2010 9769.6 28.7 N/A N/C N/A N/C

2011 12625.7 29.2 N/A N/C N/A N/C

2012 18478.0 46.4 N/A N/C N/A N/C2013* 23150.0 25.3 N/A N/C N/A N/C

SOURCE: ANNUAL REPORTNOTE: *ACMR-IBISWORLD ESTIMATES

Beijing Hyundai Mobis Auto Part Co., Ltd.

Market Share:1.1%

Hyundai Mobis was established in July 1977 and is one of the largest container manufacturers in the world.

Hyundai Mobis started production of automobile parts in 1999, specializing in the manufacture of chassismodules. That year, Hyundai Mobis sold its automobile division for four-wheel drives including Galloperand Santamo to Hyundai Motor, and its railway cars division to Korea Rolling Stock TechnologyCorporation.

In 2000, the company moved its container manufacturing plants overseas and acquired the after-salesparts business from Hyundai Motor and Kia Motor. In January 2002, Hyundai Mobis sold its heavymachinery business to Rotem Company, and completed a restructuring process to become the largestKorean automotive parts company with after-sales parts sales, automotive parts exports and module partsmanufacturing as its operating areas.


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In 2002, Hyundai Mobis established Beijing Hyundai Mobis Auto Part with registered capital of $14.36million and 485 employees. The company's main products are front chassis modules, rear chassis modules,cockpit modules and front end modules.

In September, 2012, the sixth logistics center of the company of the company, Xi'an logistics center, wasput into operation. Its delivery scope covers Shaanxi, Gansu, Ningxia, Qinghai and Xinjiang, providingservice for over 40 Beijing Hyundai dealers.


In 2013, company revenue was estimated to total $3.66 billion, with an annualized growth rate of 26.2% inthe period from 2007 to 2013. In March 2007, Hyundai Mobis established its second factory to enlargeproduction capability of front rolling, rear suspension, and front-end modules.

Beijing Hyundai Mobis Auto Part - financial performance

Year

Revenue

US Million Dollars

Growth

% change

EBIT

US Million Dollars

Growth

% change

Assets

US Million Dollars

Growth

% change2004 468.7 N/C 9.0 N/C 179.3 N/C

2005 795.5 69.7 27.1 201.1 261.0 45.6

2006 1134.8 42.7 31.1 14.8 348.6 33.6

2007 904.1 -20.3 29.6 -4.8 312.2 -10.4

2008* 2015.7 123.0 83.3 181.4 649.8 108.1

2009* 2306.7 14.4 87.6 5.2 734.7 13.1

2010* 2675.9 16.0 104.9 19.7 864.7 17.7

2011* 2943.5 10.0 N/A N/C N/A N/C

2012* 3180.0 8.0 N/A N/C N/A N/C

2013* 3657.0 15.0 N/A N/C N/A N/CSOURCE: ANNUAL REPORT

NOTE: *ACMR-IBISWORLD ESTIMATES

Shanghai Huizhong Automotive Manufacturing Co., Ltd.

Market Share:0.8%

Shanghai Huizhong Automotive Manufacturing (SHAC) is a subsidiary of the Shanghai AutomotiveIndustry Corporation (Group) and manufactures automobile chassis and commercial vehicles. The

company was established in January 1992 and is located in Lujiazui Financial and Trading Zone in Pudongdistrict, Shanghai.

SHAC has one research and development center, 12 production bases and five joint ventures. The companyhas more than 8,000 employees, of which 1,500 are technicians, and has an annual capacity of 300,000units.

SHAC operates two businesses: commercial vehicle and car chassis manufacturing. The main commercialvehicle brand is the Istana minivan series, but the company also manufactures auto-unloading vehicles,trailers, trucks and mixing vehicles. Car chassis products include front axle and rear axle systems. Parts are


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supplied to Volkswagen Shanghai and GM Shanghai, and exported to GM and Ford in the United Statesand other countries. The main component products include front and rear strut assemblies; front knuckle

with brake assemblies; sub frame pre-assemblies; rear axle assemblies; and pedal assemblies.


In 2013, SHAC was estimated to earn revenue of $2.3 billion, with an annualized growth rate of 16.5%since 2007. Total company profit was estimated to total $102.5 million in 2010.

In 2006, the Automobile Manufacturing industry drove the development of the company and, as a result,revenue increased 49.5%. The company also returned to profitability during the year due to strong salesgrowth and stable pricing levels.

In March 2004, SHAC consolidated the domestic car chassis market and entered the international market.The company focused on its commercial vehicle business, and as a result, revenue and total profit fromautomobile parts declined in 2005

Shanghai Huizhong Automotive Manufacturing - financial performance

YearRevenue


% changeEBIT


% changeAssets


% change

2004 601.3 N/C 20.6 N/C 462.0 N/C

2005 437.2 -27.3 -28.4 N/C 459.8 -0.5

2006 653.5 49.5 1.2 N/C 482.2 4.9

2007 919.7 40.7 -15.6 N/C 763.0 58.2

2008* 954.9 3.8 101.3 N/C 652.9 -14.4

2009* 1131.9 18.5 80.1 -20.9 631.7 -3.2

2010* 1497.1 32.3 102.5 28.0 712.8 12.8

2011* 1766.6 18.0 N/A N/C N/A N/C2012* 1980.0 12.1 N/A N/C N/A N/C



United Automotive Electronic Systems Co,. Ltd.

Market Share:0.8%

United Automotive Electronic Systems (UAES) was founded in December 1995. The company is a jointventure between Robert Bosch GmbH (50.0%) and Zhonglian Automotive Electronic System Co. Ltd.(50.0%) with a total investment of $322.2 million and registered capital of $144.9 million.

Bosch is the largest automotive component manufacturer in the world. As one of the largest joint venturecompanies in automotive components in China, UAES researches, develops and manufactures enginemanagement systems (EMS) and components, and electronic fuel injection (EFI) products.

UAES has five manufacturing factories in Shanghai, Wuxi, Xi'an, Wuhu and Liuzhou. The Shanghai factoryproduces electronic controllers, idling modulators, speed sensors, pressure sensors, temperature sensors,


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and ignition coils. The Wuxi factory is mainly engaged in manufacturing injectors, pressure modulatorsand fuel distribution tube assemblies. The Xi'an factory primarily manufactures electric fuel pumps, fuelpump brackets and carbon canister control valves. In 2012, for the Wuhu production base, 31 productionlines have achieved batch production. It will contribute growth of company revenue in the following years.

In 2013, UAES generated revenue of $2.11 billion. During the year, the company had about 6,400 workers.

United Automotive Electronic System - financial performance

YearUnits

RevenueUS Million Dollars

Growth% change

EBITUS Million Dollars

Growth% change

AssetsUS Million Dollars

Growth% change

2004 352.2 N/C 102.9 N/C 333.1 N/C

2005 357.6 1.5 73.8 -28.3 322.3 -3.2

2006 454.8 27.2 85.7 16.1 378.9 17.6

2007 615.2 35.3 91.5 6.8 497.4 31.3

2008* 1005.2 63.4 250.1 173.3 798.1 60.5

2009* 1049.5 4.4 318.7 27.4 885.1 10.9

2010* 1400.0 33.4 425.6 33.5 973.2 10.0

2011* 1469.9 5.0 N/A N/C N/A N/C

2012* 1621.0 10.3 N/A N/C N/A N/C



Changchun FAWAY Automobile Components Co., Ltd.

Market Share:0.7%

Changchun FAWAY Automobile Components (FAWAY) was established in 1993 with registered capital of$25.5 million. It is located in Changchun city, Jilin province. FAWAY is the fifth-largest auto partsmanufacturer in China, with a relatively stable market share of about 0.5% of total industry revenue.

FAWAY is an automotive components supplier of the First Automobile Works (FAW) Group. Majorproducts are automotive seats, instrument panels, door trims, wheels, and ignition coils.

In 2013, FAWAY resumed its growth. Company revenue increased to $1.10 billion in the first threequarters of the year.

In 2012, affected by slow growth in the domestic automobile market, FAWAY generated $1.22 billion, upby just 12.6% over 2011. The company's profit declined by 8.5% to $74.0 million due to high operatingcosts and low revenue growth.

In 2011, company revenue reached $1.1 billion, up 18.3% over 2010. Increasing operating costs offset muchof the company's profit, which decreased 14.0% from 2010.

In 2010, both revenue and total profit of the company experienced dramatic increases due to theprosperous automobile market in China. FAWAY reported sales revenue of $913.2 million, and total profitof $94.1 million, up 112.1% and 118.3% from 2009, respectively.


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In 2009, FAWAY continued to adjust its product structure, and increased investments in R&D and brandbuilding. The company reported revenue of $430.6 million. The company also reported total profit of $43.1million.

In 2008, the company took on its current name; it was previously called Changchun FAW SihuanAutomobile Co. Ltd. FAWAY completed the R&D of 12 new products in the year, including seats andinteriors. In addition, the company reinforced the degree of quality management, improving its product

quality. FAWAY realized sales revenue and total profit of $419.8 million and $22.9 million, respectively.

In 2007, both revenue and profit of FAWAY increased significantly due to surging domestic demand. Thecompany earned $401.4 million, up 33.6% from 2006. Total company profit totaled $5.9 million,increasing strongly from 2006.

In 2006, company revenue totaled $300.5 million, up 13.1% for the year. However, as raw material pricesincreased in 2005, the company only reported profit of $0.3 million for the year.

Changchun FAWAY Automobile Components - financial performance

YearUnits

RevenueUS Million Dollars

Growth% change

NPBTUS Million Dollars

Growth% change

AssetsUS Million Dollars

Growth% change

2004 409.0 N/C 4.5 N/C 229.9 N/C

2005 265.8 -35.0 -14.3 N/C 236.1 2.7

2006 300.5 13.1 0.3 N/C 231.6 -1.9

2007 401.4 33.6 5.9 1866.7 244.0 5.4

2008 419.8 4.6 22.9 288.1 226.6 -7.1

2009 430.6 2.6 43.1 88.2 275.8 21.7

2010 913.2 112.1 94.1 118.3 528.9 91.8

2011 1080.1 18.3 80.9 -14.0 638.2 20.72012 1216.7 12.6 74.0 -8.5 758.4 18.8

2013* 1097.0 N/C 58.3 N/C 897.9 N/CSOURCE: ANNUAL REPORT

NOTE: *JANUARY TO SEPTEMBER

Other PlayersShaanxi Fast Gear Co. Ltd.

Estimated market share: less than 0.5%

Shaanxi Fast Gear (SFG) was established in Xian city, Shannxi province in September 2001. SFG's mainproducts are single and twin countershaft heavy-duty transmissions; power take-offs and transfer cases;gears and various gear forgings; and automotive spare parts. SFG has annual output of 1 million units ofheavy-duty transmissions; 50 million gears of different types; and 100,000 tons of automotive forgings.Gear products are exported to the United States, Germany, Japan, Australia, Belarus, South America,Southeast Asia and other countries and regions. In 2011, SFG sold 701,200 units of transmissions andgenerated revenue of $176.5 million. In 2012, SFG's sales volume decreased 35.5% to 452,000 units,largely due to the slowdown in domestic heavy truck sales growth. On September 15th, 2013, with $81.3


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million of investment, SFG established Fast Auto Drive (Thailand) Company in Thailand. SFG furtherexpanded the international market

Dongfeng Motor Suspension Spring Co. Ltd.


Dongfeng Motor Suspension Spring was established in Xiangfan city, Hubei province, in January 2003.

The company originated from the leaf spring plant of Dongfeng Motor Corporation and specializes in theproduction of automobile suspension springs. Its annual leaf spring output is nearly 50,000 tons. In 2011,its revenue was estimated at $176.2 million.

Dongfeng Motor Suspension Spring mainly produces auxiliary car-assembling parts and components forvarious vehicles of its parent company, Dongfeng. It also supplies auxiliary parts and components forvehicles manufactured by other companies. Products include leaf springs, coiling springs, and torsion bars.Its products have been exported to the United States, Italy, Canada, Philippines and other countries. In2010, the company earned $192.7 million with leaf spring assembly output of 1.39 million units.

The company has established a suspension spring research department for designing and developing leafsprings across all series. Processes used for leaf spring production include cold-hole punching, hot rolling,medium frequency induction heating, pressure rotoblast, continuous fitting of assembly, assembly pre-compression, electrostatic painting, and infrared drying.

Shanghai Automotive Co. Ltd.


Shanghai Automotive was founded in 1925, and is a joint stock company solely owned by ShanghaiAutomotive Industry Corporation Group (SAIC). The company was listed on the Shanghai SecuritiesExchange in November 1997. In 2012, SAIC generated revenue of $75.8 billion, mainly from its automotivemanufacturing business, with total assets of $50.3 billion.

With support from SAIC, Shanghai Automotive has had continual capital expansions over the years. It has

expanded its business from the production of automotive parts to complete automobile manufacturing, aswell as businesses in the financial and information industries.

The company includes Yizheng Automotive, Automotive Gear Works, China Spring Factory, and PowderMetallurgy Factory. It also has more than 20 complete automobile and automotive parts manufacturingenterprises, including Shanghai General Motors.

Yanfeng Visteon Automotive Trim Systems Co. Ltd.


Yanfeng Visteon Automotive Trim Systems was established in 1994 with a total investment of $223.0

million and is headquartered in Shanghai's Caohejing Development Zone. The company is a 50:50 jointventure of Shanghai Automotive Industry Corporation (Group) and Visteon International HoldingsCorporation.

Yanfeng Visteon has a factory in Shanghai's Anting area. The company also holds majority stakes in severalautomotive trim and safety system manufacturing companies in Shanghai.

The company's main products include complete interiors (such as cockpit systems, door panel assemblies,door pillars and head lining); exteriors (such as painted bumper and trims), seating systems; safety


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systems; and electronics systems. In 2011, the company generated total revenue of $5.47 billion, withexports of $671 million.

Key customers of Yanfeng Visteon are Shanghai VW, Shanghai GM, FAW-VW, Dongfeng Citroen, Chang'anFord, Beijing Hyundai, Beijing Jeep, Chery, and BAIC Foton.

Xincheng Vehicle Parts Manufacturing Factory


Xincheng Vehicle Parts Manufacturing Factory was established in 1994. It is located in Zhongshan city,Guangdong province. The company has over 400 employees and annual output of more than 10 millionsets of automotive parts.

Its main products are car alarm systems, motorcycle alarm systems and other power-assembly items. Thefactory supplies products to Sanyo-Honda, Jialing-Honda, Duke-Suzuki, Qingqi-Suzuki, Quancheng-Suzuki, Wangjiang-Suzuki, Zhufeng-Kymco, and Yamaha.

Dongfeng Motor Co. Ltd.


Dongfeng Motor (DFL) was established in June 2003, and is located in Wuhan city, Hubei province. It hasbeen involved in the Auto Part Manufacturing industry in China since 1999 as a department of DongfengMotor Corporation. Dongfeng Motor Company started operating as an independent company in 2003 withregistered capital of $2 billion, invested by Dongfeng Motor Corporation (DFM) and Nissan MotorsCompany with 50.0% equity per each party. Investments from DFM include existing assets fromsubsidiaries and equities in relevant enterprises, while Nissan Motors Company provided cash at equal

value.

DFL is now one of the largest automobile and parts and accessories manufacturers in China with over70,000 employees. DFL's products include commercial vehicles, passenger vehicles, components andparts, and automotive equipment.

The company's parts and components business comprises 17 subsidiaries (specialized plants) located inHubei, Jiangsu, Qinghai, Shanghai and other areas across China.


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Operating Conditions

Capital IntensityThe level of capital intensity is medium. The Automobile Parts and Accessories Manufacturing Industry in China requires a significant level of

capital investment Production tends to rely on large investments in capital equipment

Large firms are highly automated and mechanized

Small-scale manufacturers tend to be less capital intensive than large manufacturers

Labor is also a significant input for this industry

The Auto Part Manufacturing industry in China has a medium capital intensity level. For every dollar spenton wages (including management and administration costs and R&D), about 34 cents are invested incapital.

Large-scale production requires significant capital for the installment of automated processes, equipmentand machinery. Significant investment is also needed to upgrade plant and equipment, and for process and

product development. Many manufacturing processes involve repetitive activities that are automated toincrease production speed and cost efficiency.

Small-scale manufacturers generally have lower capital investment levels than larger firms. This is due tothe high cost of acquiring new equipment, which larger firms are usually more able to afford. In addition,small firms tend to produce relatively basic products.

Technology & SystemsThe level of technology change is medium.

The technology and systems used by companies operating in the Auto Part Manufacturing industry in

China has advanced at a moderate rate in recent years.

Manufacturers' scientific research ability and technical innovation have been enhanced in recent years. Inthe 1990s, firms lacked enough funds for research and development and technology was generally out ofdate. With the industry's development, manufacturers raised funds for research and development andadopted advanced technologies and systems.

Some manufacturers have adopted computer aided design and manufacture (CAD/CAM) systems. Thesetechnologies continue to enhance production efficiency and the level and quality of products.

Manufacturing ability also increased through joint ventures and mergers. Some foreign enterprises enteredthe China market through establishing joint-venture partnerships with local manufacturers. Several firms

also merged to improve the manufacturing ability and cost structure. Now, increasing numbers of foreignenterprises have gained positions and market shares in the domestic market.


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Revenue VolatilityThe level of volatility is medium.

Growth within China's Automobile Manufacturing industry has been strong in the past decade, and thenumber of vehicles in use across China has increased significantly. This has driven significant growth inthe upstream Auto Part Manufacturing industry. Downstream auto manufacturing industries are diverse,including complete automobiles, trucks, automobile bodies, modified motor vehicles, trailers, and trolleymanufacturing. Additionally, well-known foreign manufacturers have entered the China market and

stimulated strong and steady output growth in the current performance period.

Development of the second-hand automobile market also stimulates demand for automobile parts andaccessories. Meanwhile, growth in foreign demand in recent years has also expanded export growth.

Regulation & PolicyThe level of regulation is medium and the trend is decreasing.

The automobile sector has been highly protected by the government, with high import tariffs andregulations requiring production localization for complete automobile manufacturing and restrictions onimports of parts and accessories. Domestic manufacturers find it difficult to obtain import qualification

even for high quality parts and accessories.

There are strict regulations concerning the ownership of companies in this industry. Foreign enterpriseswanting to enter the market and manufacture automotive parts and accessories in China must establishjoint ventures with domestic or foreign complete automobile manufacturers.

Firms in the industry are required to comply with government occupational health and safety regulations,acts and other mandatory requirements for employees, contractors and factory visitors.

Firms are also subject to environmental laws and regulations dealing with noise, air and waste emissions,as well as with the use, handling and disposal of hazardous materials and chemicals.

Industry AssistanceThe level of industry assistance is high and the trend of industry assistance is decreasing.

There are no specific tariffs for this industry.

Since joining the World Trade Organization, China has been committed to opening its economy to theworld, reducing customs duties and canceling some non-customs duty measures. The average customsduty of automobile parts and accessories decreased from 30.0% to 10.0%. Import quotas and permit andlicensing systems have also been cancelled. However, import tariffs still vary across products.

Item number 31 of the China Automobile Industry Development Policy states that the Chinese government

guides and supports the Auto Part Manufacturing industry. It encourages private capital investment in theindustry to help relatively advantageous enterprises become professional manufacturers and to furtherenhance production output and supply ability.

High tariff rates can lead to some domestic firms being inefficient and reluctant to increase productivity.This is due to the higher prices of imported automotive parts and accessories. This allows local firms toincrease their price, and provides no incentive to minimize costs.


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Key Statistics

Industry Data

Revenue

($b)

IVA

($b)

Establish-

ments Enterprises

Employ-

ment

Exports

($b)

Imports

($b)

Wages

($b)

TotalAssets(Billion

Dollars)2005 78.3 20.2 5,604 3,503 1,302 9.9 10.1 4.1 81

2006 99.2 25.4 6,483 3,756 1,400 12.9 13.1 4.8 98

2007 133.6 36.2 7,579 3,944 1,615 16.5 14.3 6.6 115

2008 176.5 45.9 10,331 4,141 1,928 18.3 13.9 9.5 144

2009 223.1 57.0 10,904 4,187 2,003 14.5 15.5 10.1 179

2010 292.2 73.3 11,953 4,286 2,380 19.6 21.2 16.2 215

2011 339.2 83.8 8,991 3,857 2,448 22.4 23.1 17.6 247

2012 385.8 94.4 10,035 4,073 2,613 23.9 23.2 21.2 283

2013 441.1 106.6 10,333 4,278 2,784 26.2 24.9 24.7 323

2014 496.3 119.2 10,631 4,484 2,946 29.0 26.8 28.3 364

2015 550.7 131.7 10,922 4,676 3,111 31.8 28.7 32.1 408

2016 606.8 144.6 11,209 4,849 3,276 34.6 30.6 35.8 450

2017 664.2 158.2 11,474 5,017 3,431 37.5 32.5 39.4 488

2018 725.9 171.8 11,718 5,184 3,585 40.4 34.4 43.2 528

2019 790.3 185.9 11,954 5,345 3,732 43.3 36.3 47.1 569

Annual Change

Revenue

(%)

IVA

(%)

Establish-ments

(%)

Enterprises

(%)

Employ-ment

(%)

Exports

(%)

Imports

(%)

Wages

(%)

Assets

(%)

2006 26.7 25.7 15.7 7.2 7.5 30.3 29.7 17.1 21.1

2007 34.7 42.5 16.9 5.0 15.4 27.9 9.2 37.5 16.9

2008 32.1 26.8 36.3 5.0 19.4 10.9 -2.8 43.9 25.9

2009 26.4 24.2 5.5 1.1 3.9 -20.8 11.5 6.3 24.0

2010 31.0 28.6 9.6 2.4 18.8 35.2 36.8 60.4 19.9

2011 16.1 14.3 -24.8 -10.0 2.9 14.3 9.0 8.6 15.2

2012 13.7 12.6 11.6 5.6 6.7 6.7 0.4 20.5 14.6

2013 14.3 12.9 3.0 5.0 6.5 9.6 7.3 16.5 14.1

2014 12.5 11.8 2.9 4.8 5.8 10.7 7.6 14.6 12.7

2015 11.0 10.5 2.7 4.3 5.6 9.7 7.1 13.4 11.9

2016 10.2 9.8 2.6 3.7 5.3 8.8 6.6 11.5 10.2

2017 9.5 9.4 2.4 3.5 4.7 8.4 6.2 10.1 8.5

2018 9.3 8.6 2.1 3.3 4.5 7.7 5.8 9.6 8.1

2019 8.9 8.2 2.0 3.1 4.1 7.2 5.5 9.0 7.9


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Key Ratios

IVA/revenue(%)

Imports/demand

(%)

Exports/revenue

(%)

Revenue peremployee

($'000)

Wages/revenue

(%)Employees

per est.

Averagewage

($)

2005 25.8 12.9 12.6 60.1 5.2 232 3,149.0

2006 25.6 13.2 13.0 70.9 4.8 216 3,428.6

2007 27.1 10.9 12.4 82.7 4.9 213 4,086.7

2008 26.0 8.1 10.4 91.6 5.4 187 4,927.4

2009 25.5 6.9 6.5 111.4 4.5 184 5,042.4

2010 25.1 7.2 6.7 122.8 5.5 199 6,806.7

2011 24.7 6.8 6.6 138.6 5.2 272 7,189.5

2012 24.5 6.0 6.2 147.7 5.5 260 8,113.3

2013 24.2 5.7 5.9 158.4 5.6 269 8,872.1

2014 24.0 5.4 5.8 168.5 5.7 277 9,606.2

2015 23.9 5.2 5.8 177.0 5.8 285 10,318.2

2016 23.8 5.1 5.7 185.2 5.9 292 10,928.0

2017 23.8 4.9 5.6 193.6 5.9 299 11,483.5

2018 23.7 4.8 5.6 202.5 6.0 306 12,050.2

2019 23.5 4.6 5.5 211.8 6.0 312 12,620.6

Figures are inflation-adjusted 2014 dollarsNOTE: UNLESS SPECIFIED, AN ASTERISK (*) ASSOCIATED WITH

A NUMBER IN A TABLE INDICATES AN IBISWORLD ESTIMATE ANDREFERENCES TO DOLLARS ARE TO US DOLLARS.

Jargon

ALTERNATORAn electric generator or dynamo producing alternating currents.

ANTI-LOCK BRAKING SYSTEM (ABS)Prevents a vehicle's wheels from locking up under heavy braking.

GLOBAL POSITIONING SYSTEM (GPS)An electronic system that uses a network of satellites to indicateon a computerized receiver the position of a vehicle, ship, or person.


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Industry China