Guangzhou AM Parts Market Approaches Explosive Growth

Booming new-car sales have already made China the world’s biggest auto market, and all signs point to continued annual growth rates in the 20-30% range there.

But growing competition as more contenders rush in to capture a slice of this expanding pie means that profit margins for assembled cars are shrinking. This situation is prompting more companies to look at the seemingly more lucrative, stable, and sustainable aftermarket (AM) auto parts market.

Revenues from auto-service spending are soaring at a rate of about 40% a year and are forecast to reach 1-1.5 trillion renminbi (RMB) this year. These figures are also a strong indication of the performance of the AM parts industry.

Guangdong Province alone accounts for a third of all new-car sales in China. Sales are especially robust in the Pearl River Delta, which is centered on the province capital of Guangzhou, and the AM business there is growing as fast as car sales.

A senior official at the Guangzhou sales center of the FAW Mazda Motor Sales Co. emphasizes that the AM service business is the most stable source of profit for his company.

One of the top suppliers of auto services is the AEC Group, a retail pioneer in Guangzhou’s AM parts and accessories business, which sells about 30,000 different auto parts, accessories, and car-beautification items in its stores. After gaining a solid foothold in Guangdong, the group has set up 40 parts/accessories chain outlets throughout China with the aim of becoming a national leader in the parts and accessories business.

Industry sources say that with new-car sales topping 12 million units in China, the AM business there is about to experience explosive growth. Data released by Technomic, an American market-research firm, show that the Chinese mini-car sector alone generates an annual demand for AM parts and accessories that is estimated at around 200 billion RMB.

The potential of this market is attracting more and more domestic and foreign businesses. NAPA Auto Parts, the world's largest auto-parts distribution system, and GM AC Delco, the world's largest automotive rapid maintenance chain-store system, have set up operating bases in Guangzhou. Robert Bosch, a leading international parts brand, operates more than 150 service points around China. China-based rapid-maintenance chain-store brand King Polo has tied up with Toyota, and is rapidly developing its own service network in China’s already big and rapidly growing market.