China's Automotive Brake System Parts Industry Faces Growing Competition

Manufacturers struggle with cost-cutting suppliers and higher-end producers

According to statistics compiled by the China Association of Automobile Manufacturers (CAAM), China exported US$387 million worth of automotive brake parts in May, up 11.56% from the same period of last year. Exports of the products in the first five months of 2013 totaled US$1.63 billion, an 8.3% year-on-year (YoY) increase, with shipments going to such major markets as the U.S., the U.K., Japan, Germany, and Canada.

China's imports of automotive brake parts increased 8.28% YoY in May, to US$96 million, but fell 8.09% in the first five months, to US$429 million. Most of the imports came from Japan, Germany, South Korea, France, and the U.S.

Hsu Jin-chuan, CEO of the professional automotive website AUTOCHINA360.com, points out that China's automotive brake system industry is in a stage of transformation in which all players have to pay strict attention to new customer demands and to shortening the technology gap with leading international makers.

An AUTOCHINA360.com researcher says that Chinese brake-parts makers are stuck in a domestic market that is expanding only gradually and that they will face severe challenges if they continue to engage in price-cutting competition. One challenge is the technical threshold for the manufacture of high-level products such as those made by counterparts in the industrially advanced nations; another is the ever-fiercer price-cutting competition from rivals in emerging markets.

Most automotive brake-parts manufacturers in China today are still at a relatively low level of technology, and their systemization and modularization capabilities are in the initial phase. Generally speaking, the great majority of them are small and medium-sized enterprises (SMEs) with low technical levels, weak product-development capability, and limited product lines (producing only one or a few brake-system parts). Only a small number of them control the core technologies they need to become OE suppliers to global automakers and achieve an economic scale of production.

Competition in the line has been intensified by an increasing number of international brake-parts suppliers that have entered China to develop opportunities in the world's largest automobile market.

Some Chinese enterprises with international competitiveness and core technological know-how have been working hard to upgrade their strength through aggressive R&D programs, the setting up of joint ventures with foreign partners, or striving to learn newer technologies from the most advanced players in the line. These efforts have helped some of them to win more OE orders from local automakers; in some high-level brake-parts categories such as the anti-lock brake systems (ABS), however, they still lag behind leading international counterparts.

Taizhou Hongfa
One of the foremost companies in the line is the Taizhou Hongfa Auto Parts Co., an ISO 9001:2008-certified developer and manufacturer of high-quality and durable aftermarket (AM) replacement auto parts, including hydraulic brake master cylinders, brake wheel cylinders, clutch master cylinders, and clutch slave cylinders. The company markets its products globally under its own “HFOK” and “JBS” brands.

The company has grown rapidly since its establishment in 1997, and has become a major supplier with annual revenues of US$8 million. In mid-2011 Hongfa moved to a new, 13,000-square-meter factory in Yuhuan County, Taizhou City in Zhejiang Province--the largest production base for auto and motorcycle parts in southeast China. The new factory employs about 200 people and has an annual production capacity of around 300,000 sets of parts.

Hongfa now supplies hundreds of brake master/wheel and clutch master/slave cylinder models for over a thousand auto models, and adds over 100 new models each year. The high quality, competitive prices, and strong durability of the firm's products have made them widely popular with customers worldwide, especially in Europe, North America, Southeast Asia, and the Middle East.

The firm claims that its introduction of the most advanced manufacturing technologies, top-end equipment, and comprehensive range of testing/inspection instruments so as to assure the top quality and durability of every product is a never-ending effort.

Yuhuan Jianghong
Another top company in the line is the Yuhuan Jianghong Machinery Co., a specialized developer and manufacturer of high-quality, durable brake calipers for cars and trucks. It is also a key member of CAAM's automotive braking committee.

Headquartered in the Yuhuan's Kanmen Science & Technology Industrial Zone, the ISO/TS 16949-, ISO 9001:2000-, and QC/T592:1999 (China)-certified Yuhuan Jianghong claims an abundance of experience and know-how as well as a comprehensive range of production equipment including computer numerical control (CNC) machining centers, lathes, and drilling machines.

The company utilizes a full range of top-end testing and inspection instruments which, coupled with stringent quality-control systems, assure the highest precision and quality. All testing and inspection are done in-house, including high/low-pressure sealing, caliper-piston return, and torque and drag, the results of which are recorded and are available to customers.

Yuhuan Jianghong operates a modern, integrated plant with over 200 skilled workers, including engineers and over 20 technicians, who turn out about 600,000 sets of brake calipers annually. The company claims that this makes it a top supplier to the global market.

The firm's products are popular around the world, especially in North America, Europe (Germany, Russia, the U.K., etc.), Australia, South Africa, Latin America, and Southeast Asia.

Fierce Competition
The competition in China's auto-parts market has been intensifying as foreign players enter the market there. In the assembled-car market, independent automakers are facing increasingly high pressure from the local operations of international brands, driving them in a constant effort to cut costs, enhance after-sales service, and upgrade technical abilities; and this, in turn, is forcing them to cooperate more closely with their parts suppliers.

In the automotive brake system parts segment, the trend in global development is toward systemization, modularization, and integration. The keys to the sustainability—even survival—of parts makers are operating scale, technical strength, product quality, cost advantage, and service quality.