At present, the ratio of the income scale of China’s automobile and parts industry is about 1:1, which still has a gap with the ratio of 1:1.7 in the auto power. The parts industry is large but not strong, and there are many shortcomings and breakpoints in the upstream and downstream of the industrial chain. The essence of global auto industry competition is the competition of supporting systems, that is, the competition of industrial chain and value chain. Therefore, optimizing the upstream and downstream layout of the industry, accelerating the integration and innovation of the supply chain, building an independent, safe and controllable industrial chain, and enhancing China’s position in the global industrial chain are the endogenous power and realistic requirements for achieving the high-quality development of China’s automobile exports.
China’s auto parts exports are generally stable
1. In 2020, China’s exports of parts and components fell more than complete vehicles
Since 2015, China’s auto parts (including key auto parts, spare parts, glass, and tires, the same below) exports have not fluctuated much. Except for the export volume exceeding 60 billion U.S. dollars in 2018, all other years have fluctuated around 55 billion U.S. dollars, which is similar to the annual export trend of complete vehicles. In 2020, China’s total export of auto products will exceed 71 billion U.S. dollars, with parts and components accounting for 78.0%. Among them, the export value of complete vehicles was US$15.735 billion, a year-on-year decrease of 3.6%; the export value of parts and components was US$55.397 billion, a year-on-year decrease of 5.9%, which was higher than that of complete vehicles. Compared with 2019, the monthly difference in parts exports in 2020 is obvious. Affected by the epidemic, exports fell to a trough in February, but returned to the same period last year in March; due to weak demand in overseas markets, they continued to decline for the next four months, and stabilized and recovered in August. Exports continued to run at a high level from September to December. . Compared with the trend of China’s vehicle exports, parts and components rebounded to the level of the same period of the previous year one month earlier than complete vehicles, which shows that parts and components are more sensitive to the market.
2. China’s auto parts exports are dominated by key parts and spare parts
In 2020, China’s export of key auto parts was US$23.021 billion, a year-on-year decrease of 4.7%, accounting for 41.6%; the export of parts and accessories was US$19.654 billion, a year-on-year decrease of 3.9%, accounting for 35.5%; and the export of auto glass was US$1.087 billion, a year-on-year decrease of 5.2%. ; Automobile tire exports were 11.635 billion US dollars, a year-on-year decrease of 11.2%. Automobile glass is mainly exported to traditional automobile manufacturing countries such as the United States, Japan, Germany, and South Korea. The main export markets for automobile tires are the United States, Mexico, Saudi Arabia, and the United Kingdom.
Specifically, the main types of key parts exports are frame and brake systems, with exports of 5.041 billion and 4.943 billion US dollars respectively, mainly exported to the United States, Japan, Mexico, and Germany. In terms of parts and accessories, body panels and wheels are the main export categories in 2020, with exports of 6.435 billion and 4.865 billion U.S. dollars, of which the wheels are mainly exported to the United States, Japan, Mexico, and Thailand.
3. The export markets are concentrated in Asia, North America and Europe
Asia (this article refers to the rest of Asia without China, the same below), North America and Europe are the main export markets for Chinese parts. In 2020, China’s largest export market for key parts is Asia, with an export value of 7.494 billion U.S. dollars, accounting for 32.6%; followed by North America, with an export value of 6.076 billion U.S. dollars, accounting for 26.4%; and its export to Europe is 5.902 billion U.S. dollars, accounting for 32.6%. 25.6%. In terms of parts and accessories, exports to Asia accounted for 42.9%; exports to North America were US$5.065 billion, accounting for 25.8%; exports to Europe were US$3.371 billion, accounting for 17.2%.
Although there are trade frictions between China and the United States, China’s exports of parts and components to the United States will decline in 2020, but whether it is key parts or parts, the United States is still China’s largest exporter, and both of these items account for 24% of exports to the United States. %, the total export value exceeds 10 billion U.S. dollars. Among them, the main export products of key parts are brake systems, suspension systems and steering systems, and the main export products of parts and accessories are aluminum alloy wheels, car bodies and electric lighting devices. Other countries that export more key parts and accessories include Japan, South Korea, and Mexico.
4. RCEP agreement regional auto industry chain export relevance
In 2020, within the RCEP Agreement (Regional Comprehensive Economic Partnership Agreement) area, Japan, South Korea, and Thailand are the top three countries in China’s export of key automobile parts and parts. The products exported to Japan are mainly aluminum alloy wheels, bodies, ignition wiring units, brake systems, airbags, etc.; the products exported to Korea are mainly ignition wiring units, bodywork, steering systems, airbags, etc.; the main exports to Thailand are car bodies, aluminum Alloy wheels, steering systems, braking systems, etc.
China’s auto parts imports have fluctuated in recent years
1. China’s imports of parts and components increased slightly in 2020
From 2015 to 2018, China’s auto parts imports showed an upward trend year by year; there was a large decline in 2019, with imports down 12.4% year-on-year; although affected by the epidemic in 2020, due to strong domestic demand in China, imports amounted to US$32.113 billion, a slight increase of 0.4% over the previous year.
Judging from the monthly trend, the import of parts and components in 2020 will show a trend of low before and high afterwards. The lowest point of the year is from April to May, mainly due to insufficient supply caused by the spread of overseas epidemics. Since stabilizing in June, Chinese domestic vehicle companies intend to increase spare parts inventory in order to ensure the stability of the supply chain. In the second half of the year, the import of parts and components has always been at a high level.
2. China’s key parts account for nearly 70% of imports
In 2020, China’s imports of key auto parts were USD 21.642 billion, down 2.5% year-on-year, accounting for 67.4%; imports of parts and accessories were USD 9.42 billion, up 7.0% year-on-year, accounting for 29.3%; imports of auto glass were USD 4.232 billion, up 20.3% year-on-year ; Imports of automobile tires amounted to US$ 6.24 billion, down 2.0% year-on-year.
From the perspective of key components, transmission imports accounted for half of the country. In 2020, China imported 10.439 billion U.S. dollars of transmissions, a slight decrease of 0.6% year-on-year, accounting for 48%. The main import sources are Japan, Germany, the United States and South Korea. Then comes the frame and gasoline/natural gas engine. The main import countries of the frame are Germany, the United States, Japan and Austria. The gasoline/natural gas engine is mainly imported from Japan, Sweden, the United States and Germany.
In terms of parts and accessories imports, body panels accounted for 55%, and imports amounted to US$5.157 billion, a year-on-year increase of 11.4%. The main importing countries were Germany, Portugal, the United States and Japan. The import value of automotive lighting equipment was 1.929 billion US dollars, an increase of 12.5% year-on-year, accounting for 20%, mainly from Mexico, the Czech Republic, Germany, and Slovakia. It is worth mentioning that with the accelerated advancement of China’s domestic smart cockpit technology and supporting facilities, the import of related parts and accessories has shown a trend of narrowing year by year.
3. Europe is the main import market for parts and components
In 2020, Europe and Asia will be the main import markets for China’s key automobile parts. Among them, imports from Europe were 9.767 billion US dollars, a slight increase of 0.1% year-on-year, accounting for 45.1%; imports from Asia were 9.126 billion US dollars, a year-on-year decrease of 10.8%, accounting for 42.2%. Similarly, the largest import market for parts and accessories is Europe, with imports of US$5.992 billion, an increase of 5.4% year-on-year, accounting for 63.6%; followed by Asia, with imports of US$1.860 billion, a year-on-year decrease of 10.0%, accounting for 19.7%.
In 2020, the main importing countries of China’s key automobile parts are Japan, Germany and the United States. Among them, imports from the United States have increased significantly, with a year-on-year increase of 48.5%. The main imported products are transmissions, clutches and steering systems. The main sources of parts and accessories imports are Germany, Mexico and Japan. Among them, imports from Germany were US$2.399 billion, an increase of 1.5% year-on-year, accounting for 25.5%.
4. Within the RCEP agreement area, China is highly dependent on Japanese products
In 2020, Japan, South Korea, and Thailand rank among the top three sources of key components and spare parts for China’s imports from the RCEP agreement area. The main imported products are transmissions and their parts, 1~3L displacement vehicle engines and bodies. The degree of dependence is high. Within the RCEP agreement area, from the perspective of imports, 79% of transmissions and automatic transmissions for cars are imported from Japan, 99% of vehicle engines are from Japan, and 85% of car bodies are from Japan.
The development of parts and components is closely related to the vehicle market
1. Chinese parts companies should be ahead of the entire vehicle
From the perspective of the policy system, China’s domestic automobile industry policies are mainly formulated around complete vehicles, with parts and components companies only acting as “supporting actors”; from the perspective of exports, independent brand automobile wheels, glass and rubber tires have a place in the international market, with high added value, The development of high-margin core components lags behind. As a basic industry, auto parts involve a wide range and long industrial chain. Without the endogenous drive and coordinated development of the industry, it is difficult to make breakthroughs in core technologies. It is worthy of reflection that in the past, OEMs had a one-sided understanding of purely pursuing market dividends, maintaining simple supply-demand trading relationships with upstream suppliers, and did not play a leading role in the front-end industry chain.
From the perspective of the global component industry layout, with major OEMs as the core and surrounding areas, three major industrial chain clusters have been formed around the world: the North American industrial chain cluster with the United States as the core and maintained by the US-Mexico-Canada Agreement; and Germany and France as the core. The core is the European industrial chain cluster radiating Central and Eastern Europe; the Asian industrial chain cluster with China, Japan, and South Korea as the core. To gain differentiated advantages in the international market, independent brand car companies need to make good use of the industrial chain cluster effect, attach importance to the synergy of the upstream supply chain, increase front-end design R&D and integration, and encourage powerful independent parts companies to go overseas together, or even Go ahead of the whole car.
2. China’s independent leading suppliers usher in a period of development opportunities
The epidemic will have a short-term and long-term impact on the global auto parts supply, which will benefit China’s leading domestic companies with global production capacity. In the short term, the epidemic has repeatedly dragged down the production of overseas suppliers, and Chinese domestic companies have taken the lead in resuming work and production. Some orders that cannot be supplied in time may be forced to switch suppliers, providing a window for Chinese parts and components companies to expand overseas business. In the long run, in order to reduce the risk of overseas supply cuts, more OEMs will include independent suppliers into the supporting system, and the process of import substitution of domestic core components is expected to accelerate. The automobile industry has the dual attributes of cycle and growth. Under the background of limited market growth, structural opportunities for the industry can be expected.
3. The “New Four Modernizations” will reshape the pattern of China’s auto industry chain
At present, four macro factors, including policy orientation, economic foundation, social motivation, and technological drive, are accelerating to nurture and promote the “new four modernizations” of the automotive industry chain-power diversification, networking, intelligence and sharing. OEMs customize and produce suitable models according to different mobility requirements; platform-based production will quickly iterate the appearance and interior of vehicles; flexible production will help maximize the efficiency of the production line. The maturity of electrification technology, the integration of the 5G industry, and the gradual realization of highly intelligent shared driving scenarios will deeply reshape the pattern of the future automotive industry chain. The three-electric system (battery, motor, and electronic control) driven by the rise of electrification will replace the traditional internal combustion engine and become the absolute core; the main carrier of intelligence-automotive chips, ADAS, and AI matching will become a new point of struggle; As an important component of networking, four major driving factors, C-V2X, high precision maps, autonomous driving technology, and policy synergy are indispensable.
Aftermarket potential provides development opportunities for Chinese auto parts companies
According to OICA (World Automobile Organization) estimates, the global car ownership in 2020 will be 1.491 billion. The ever-increasing inventory provides a strong business channel for the automotive aftermarket, which means that there will be more after-sales service and maintenance needs in the future. Chinese parts companies need to seize this opportunity.
Take the United States as an example. As of the end of 2019, there were approximately 280 million vehicles in the United States; the total mileage of vehicles in the United States in 2019 was 3.27 trillion miles (approximately 5.26 trillion kilometers), and the average vehicle age was 11.8 years. The increase in vehicle mileage and average vehicle age has driven the increase in after-sales parts and maintenance expenditures. According to the calculations of the American Automotive Aftermarket Suppliers Association (AASA), the size of the U.S. automotive aftermarket reached 308 billion U.S. dollars in 2019. The increase in market demand has benefited most from companies that focus on automotive aftermarket services, including parts dealers, maintenance service providers, and second-hand car dealers, which are good for China’s auto parts exports.
Similarly, the European aftermarket also has great potential. According to data from the European Automobile Manufacturers Association (ACEA), the average age of a car in Europe is 10.5 years. At present, the market share of the German OEM system is basically the same as that of independent third-party channels. In the repair and replacement service market of tires, maintenance, beauty, and consumable parts, the independent channel system accounts for at least 50% of the market; and in the two businesses of electromechanical repair and sheet spraying, the OEM system occupies more than half of the market. At present, Germany’s imported auto parts mainly come from OEM suppliers in Central and Eastern Europe such as the Czech Republic and Poland. The products imported from China are mainly tires and brake pads. In the future, Chinese parts companies can increase their expansion in the European market.
The automobile industry is experiencing the largest window of development in a century. As the auto parts industry in the upstream and downstream of the industrial chain is moving along with it, it is in a dynamic process of integration, reorganization, and competition. It needs to seize opportunities, strengthen itself, and make up for its shortcomings. Adhering to independent development and taking the road of internationalization is the inevitable choice for the upgrading and upgrading of China’s auto industry chain.
Source: China Auto News