The Restrictive Factors and Main Problems in the Development of China's Auto Parts Industry

At the beginning of 2009, commissioned by the Industry Coordination Department of the National Development and Reform Commission, the Chinese Society of Automotive Engineers carried out a survey on the status of the auto parts industry and its product development capabilities. The survey was conducted in the form of comprehensive questionnaires and technical questionnaires. The scope of investigation is focused on the production of auto parts and components in key industries, as well as five major assemblies and their parts and components such as engines, transmissions, axles, steering systems, and brake systems. Among them, a total of 522 questionnaires were distributed and 148 were recovered; a total of 119 technical questionnaires were issued and 43 were recovered. The following discussion is based on the results of the questionnaire survey and combines the visits and investigations of some vehicle and component companies.

(I) Lack of systematic planning

We currently lack a systematic plan for the transformation, upgrade direction, and policy measures of the auto parts industry.

The automobile industry policies of 1994 and 2004 all mentioned the development of auto parts and components, and the “Regulations for the Adjustment and Revitalization of the Auto Industry” was the research and development, autonomy and industrialization of key auto parts technology, and the merger and reorganization of parts and components companies. We have repeatedly referred to the export of parts and components, but this is not enough. We also lack systemic strategic design and policy design for the process of transformation and upgrading of auto parts industry, including strategic objectives, implementation steps, and standards and regulations. Policy measures, etc.

We must consider auto parts as a real industry, not only focusing on supporting markets, but also on the aftermarket; not only focusing on the domestic market, but also paying attention to the export market; not only focusing on high-tech spare parts, but also pay attention to different levels of technology The parts and components have a clear direction for the transformation and upgrading of China's auto parts industry.

(2) Lack of core technology is a bottleneck that restricts development

Some recent situations have shown that the gap between China's auto parts products and the world's leading level in high-end technology has not been gradually reduced with the continuous growth of China's auto industry, but has instead expanded. This is mainly reflected in the following: With the strong technical strength, foreign-invested companies firmly occupy the commanding heights of market competition in the matching of key auto parts, and Chinese auto parts manufacturers have a high degree of dependence on foreign companies in core technology. In 2007, China's automotive EFI system, engine management system (EMS), ABS, micro-motors, and airbag production, foreign-funded enterprises accounted for 100%, 100%, 91%, 97% and 69% respectively.

The lack of core technology is also a bottleneck restricting the development of the parts and components industry itself. Among the more than 5,000 automotive parts and components companies in the country, there are currently more than 1,200 foreign-invested enterprises, and the trend of wholly owned and controlled foreign-owned enterprises is becoming increasingly apparent.

(III) Human Resources and Technical Resources Are Weak Links

This survey is particularly noteworthy for the results of the investigation of “the main factors restricting enterprises' ability to improve product development”.

In the survey, a total of 13 factors were listed, including: human resources, financial resources, high-tech product technical resources, industry-university-research cooperation resources, government and industry support, corporate management, corporate culture and incentive mechanisms, and lack of corresponding Inadequate strategic planning, inadequate protection of intellectual property rights, insufficient market share of the enterprise's products, inactive foreign investment in the joint venture, and unsatisfactory and increasingly stringent laws and regulations in support of the vehicle manufacturer. The survey results show that the human resource factor is the first important factor constraining enterprises to improve product development capabilities, followed by high-tech product technology resources, and capital resources are also one of the more important factors.

In addition, the investigation results in the investigation of “the current company’s most needed product development capabilities” also revealed some important issues. The survey results show that, in addition to 42.7% of companies that "complete process new product development" is the most needed product development capabilities, a total of more than 50% of companies believe that localized product manufacturing process development, reverse development, adaptive development, etc. 3 items are the most needed product development capabilities.

From this we can draw two conclusions: First, the requirements of the vehicle manufacturers for product development capabilities of parts and components companies are still at a lower level; second, the development of self-owned brand vehicles and the improvement of technology level will be It plays an important role in promoting the auto parts and components industry to improve its own research and development capabilities.

(4) The "Zero-zero relationship" situation has affected the improvement of competitiveness

At present, the fragmentation of the parts and components industry and the weak ability to innovate are, to a large extent, affected by the interrelationships between supply, trading methods, and functional sharing with vehicle companies.

Based on the statistical results of this survey and company research, we can analyze the negative impact of the “zero-to-zero relationship” on the competitiveness of parts and components as follows:

First, local protection plays an important role in the “zero-to-zero relationship,” which objectively exacerbated the situation.

Second, the unstable relationship with the vehicle manufacturers has made the parts and components companies unwilling to conduct product research and development.

Third, there is no guarantee of return on investment, so that parts and components companies do not dare to carry out product development. According to the survey results, in the pricing agreement for vehicle and component companies, 25% of the cases did not consider the recovery of these investments at all, and coupled with the unstable supply relationship with the OEM, the component companies did not dare to R & D to invest too much money and energy.

(5) Insufficient innovation capacity of industrial clusters, and outstanding low-level competition issues

China has basically formed six large industrial clusters including northeast, Beijing, Tianjin, central China, southwest, Yangtze River Delta, and Pearl River Delta. However, China's spare parts industrial clusters are still in the initial stage of development. There are many outstanding problems:

First, the situation of "scattered, chaotic, and small" is relatively common. National automobile manufacturers have set up industrial parks one after another for the purpose of supporting facilities nearby. Often, there are dozens of manufacturers that produce the same auto parts in a county, creating a situation of “scattered, chaotic, and small”.

Second, there is a shortage of leading companies with strong key components. In 2007, China’s largest parts and components company Wanxiang Group’s operating income was 40.8 billion yuan, while the world’s largest auto parts company Bosch Group’s sales revenue in 2007 was 36.2 billion US dollars, a huge gap between the two.

Third, it is still in the stage of utilizing low-cost advantages, and its ability to innovate is insufficient.

(VI) The export and internationalization of parts and components are facing many challenges

According to the statistics of the survey, 84.2% of the enterprises that have not yet exported products have plans to export products within the next five years. With regard to other internationalization measures, 44.12% of enterprises have technical output considerations. 26.47% of companies have considerations of setting up factories overseas or conducting overseas acquisitions.

The survey data shows that 23.2% of the surveyed enterprises are exporting through their own sales channels, and their product export strength has increased. However, the survey results on the processing conditions of export products and major barriers to exports also reflect that China’s auto parts products are facing many challenges in export and internationalization:

First, the issue of localization of export product materials deserves attention. Whether the processing of incoming materials or incoming materials, will increase the cost of product materials, so localization of export product materials is very important, and only in this way can we effectively play the advantages of low labor costs.

Second, the low value-added status of export products has not changed. At present, China's auto parts exports are mainly based on factor cost advantages. Most of the exported parts and components are aluminum wheels, water tanks, glass, wire harnesses and other low-value-added, high-resource-consumption products.

Third, companies do not pay enough attention to the intellectual property issues involved in the export of automotive products. Recently, China's auto parts companies and foreign companies have increased their number of lawsuits concerning intellectual property rights. However, from the perspective of the surveyed companies on the major obstacles to the export of parts and components, this problem has not attracted sufficient attention from companies.

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