China's Auto-Parts Exports Grow Rapidly in 2010

Vehicles of various sources will adopt ever more China-made parts and accessories

The auto parts sector in China has been speeding up its development to meet the demand of the world's largest car market. The production value of Chinese auto parts industry has been on an encouraging uptrend over the past 10 years, from about 170 billion renminbi (Chinese yuan) in 2000 to 1 trillion RMB in 2009 and 1.4 trillion RMB in 2010, according to statistics compiled by the China Association of Automobile Manufacturers (CAAM).

Seemingly immune from recession, China's auto-parts exports again have soared after the global downturn. In the first 10 months of 2010, some US$32.67 billion of China-made auto parts were exported, up 44.2% from the same period of 2009. The sales of auto parts domestically in the first eight months reached 1.03 trillion RMB, up 46.2% year-on-year (YoY), with profits totaling 83.2 billion RMB, up 81.5% from a year earlier.

With China having dethroned the U.S. as the world's biggest car market in 2010, industry experts say that China's auto-parts sector will likely see more promising growth and offer more investment opportunities for newcomers.

Inevitably moved by market forces, ever more international automotive enterprises have been eying China as the next profit-maker. Nick Scheele, president of Ford Motor, said in 2009 that the maker of the iconic pony car Mustang would be adopting increasingly more parts and accessories from China, promising in the same year that Ford would procure US$1 billion of parts from China, with other global automakers also promising to do the same. The developing scenario is that both China-made and imported cars will adopt increasingly more parts and accessories supplied by Chinese parts makers.

Higher Growth
Quoting customs data, CAAM says that in the first half of 2010 the growth rate of China's auto-parts exports exceeded that of assembled vehicles; while the export value of China-made auto parts in the same period was U$18.61 billion, up 55.3% YoY, compared to 21.5% for assembled vehicles.

Specifically, the export value of automotive engines was US$467 million, up 73.8% YoY; auto-parts, accessories and vehicle bodies totaled US$9.97 billion, up 56% YoY. The exports of automobile and motorcycle tires totaled US$4.1 billion, up 37.9%, with that of related products totaling US$3.71 billion, up 70.5%.

Industry experts say that from September 2009, the Chinese central government began offering incentives such as export tax rebates, higher export financing etc. to facilitate auto-parts exporters' operations, which are again filling orders from abroad driven by the global recovery.

The top-three auto parts exports from China in the first-half of 2010 were automotive tires (US$4.07 billion), automotive electronics and gauges (US$3.2 billion), and instrument/body & accessories, all of which accounted for 56% of the nation's auto-parts exports.

Production Hub
Zhejiang Province is the key hub of auto parts production in China, with over 7,000 makers clustered to make the province the leader in the number of companies, production value, and employees.

Zuian, a southern city in Zhejiang province, is dubbed the "auto and motorcycle parts city" in China, with some 1,500 companies producing auto and motorcycle parts. Examples include Zhejiang Jingu Radiator Co., Ltd., a major maker of automotive radiators and formally a “Zhejiang Technology Firm” and “Ruian Enterprise in the Hi-Tech Sector” with factories in the auto-parts industrial zone; and Ruian EHUA Auto Parts Co., Ltd., a leading maker set up in 1987 that turns out wide ranging parts.

A senior manager of Taizhou Yihao Steering Gear Co., Ltd. says that some local companies began learning aftermarket (AM) auto parts production in the early 1990s, but discovered the harsh reality of low margin, with some them turning to export to achieve initial success.

Guangsheng Auto Parts Manufacture Co., Ltd. is another successful example, perhaps indicative of the benefit of attending global trade shows. The maker participated in the Automechanika Frankfurt event, the world's largest biennial AM auto-parts show, and Specialty Equipment Market Association (SEMA)/AAPEX show in Las Vegas in 1998. Now the maker supplies to over 100 nations.

Major Export Destinations of China-Made Auto Parts Unit: US$1 million
Rank	Nation/ Region	Jan.-June, 2010		2009		2008
		Value	YoY	Value	YoY	Value	YoY
1	U.S.	4580.5	40.1%	7443.3	-7.2%	8010.8	-10.2%
2	Japan	2283.3	83.1%	3441.6	-27.0%	4437.5	28.7%
3	Korea	983.5	63.9%	1452.5	-20.0%	1678.8	12.4%
4	Germany	727.7	68.8%	1011	-9.8%	1115.2	14.1%
5	U.K.	513	65.3%	785.4	17.1%	669	-10.6%
6	Canda	468.2	50.9%	735.1	-15.7%	698.9	3.8%
7	Australia	423.2	47.6%	718.9	7.2%	670.4	7.3%
8	UAE	414.5	13.8%	820.7	4.5%	762.9	22.4%
9	Netherlands	400.3	70.6%	633.8	-25.7%	853	-14.4%
10	Iran	388.2	59.6%	582.3	10.4%	441.5	53.1%
11	India	365.6	126.0%	486.3	-19.4%	597.3	52.7%
12	Mexico	358.5	104.2%	486.7	6.1%	438.5	13.0%
13	Hong Kong	325.3	49.3%	515.6	-19.2%	637.8	18.0%
14	Italy	300.6	14.9%	509.9	-22.6%	624.3	30.9%
15	Russia	284.3	160.3%	310.7	-59.5%	702.1	144.4%
Source: China Association of Automobile Manufacturers