In recent years, the development trajectory of China's automotive industry has clearly demonstrated that the auto parts and components sector is no longer a dependent industry tied to整车 (whole vehicle) manufacturers. It now possesses the capability and conditions to evolve into an independent industry. As a result, the establishment of a dedicated industry organization is not only necessary but also urgent. These words were spoken by Shi Hongshi, the general manager of Beijing Automotive Industry Group Co., Ltd. and a key figure in the auto parts industry, and left a strong impression on the reporter.
Over the past two years, China’s auto parts industry has experienced unprecedented growth. In the face of historical opportunities and intense international competition, where are these companies headed? How can relevant departments guide them to compete effectively and follow a path of healthy development? Is there a need for an independent industry organization? These issues should be prioritized on the agenda of the relevant authorities.
Reporter: First, could you give your assessment of the current environment in which Chinese auto parts companies operate?
Shi Hong: To begin with, I want to emphasize that as a world-class product, the automobile stands at the forefront of global economic integration. Its main feature is the strong global alliances among multinational automotive corporations, asset restructuring, and joint product development. The interaction between integrated procurement and sales service networks has further reduced costs, expanded production scale, and enhanced overall competitiveness. The competitive edge of multinational automakers in China is becoming more evident.
The auto parts companies that have been separated from traditional vehicle manufacturers are gradually forming global professional parts groups. Leveraging their strengths in product development and collaboration with vehicle companies, they have established competitive advantages in system development and modular supply. Under the backdrop of major structural adjustments in the auto industry, a global purchasing model has emerged.
However, local Chinese auto parts companies face restrictions due to the different product standards and management systems imposed by multinational corporations from Germany, the U.S., Japan, and South Korea. This makes it extremely difficult for them to directly enter the procurement systems of these giants. Therefore, many companies have started with joint ventures, second-tier partnerships, and asset reorganization, going through a challenging process of mergers and acquisitions. Due to the lack of national standards tailored to China’s conditions, Chinese auto parts companies often find themselves unable to meet the requirements of multinational firms, losing their voice in the market.
As China moves deeper into the post-WTO transition period, the market will be fully open. China's auto parts market is characterized by rapid development, a large market size, and the presence of international giants. As a result, Chinese auto parts companies are now fully immersed in the global competitive landscape.
Compared to mature market economies, Chinese auto parts companies still need to continuously improve their business environment.
Reporter: Earlier, you mentioned that auto parts have become an independent industry and should have its own organization. What is your current view on this?
Shi Hong: In the automotive industry, vehicle manufacturers and parts suppliers are interdependent. Parts form the foundation of vehicles. Technologically, the level of parts determines the technological level of the vehicle and reflects its value. However, historically, in China’s automotive industry, the situation was reversed—parts companies followed the lead of整车 manufacturers, becoming dependent on them. Especially after most of the vehicle industry came under foreign control, China lost its voice, and many state-owned parts companies, once the backbone of the industry, found themselves in a vulnerable position. Some even reached a point of desperation, with shrinking space for survival and growth.
In the past two years, changes in procurement rules, rising raw material and vehicle prices, and growing tensions between整车 and parts companies have led to unsustainable conditions. There is a clear trend toward conflict between the two sides. In the short term, parts companies have tried various methods to gain a platform for equal dialogue with vehicle manufacturers. However, due to the mismatch in "industry status," these efforts have not yielded substantial results. At the same time, parts companies find themselves in an awkward and distorted position within the industry. Even industry organizations are subservient to整车 associations, failing to represent the true interests of the parts sector.
Two years ago, former Minister of Machinery Industry Shao Qihui pointed out that auto parts could gradually become an independent industry, separate from整车 manufacturing. The development of the automotive industry has made the industrialization of auto parts inevitable.
Reporter: From a market perspective, how do you understand the urgency of establishing an auto parts industry organization? Are some of our current organizations not already fulfilling this role?
Shi Hong: The socialization of the parts systems of major auto companies like FAW and Dongfeng, along with the healthy development of independent parts companies, shows that Chinese auto parts companies have become market-oriented. Over 20 years of reform and opening up, and during China’s WTO accession transition period, the auto parts market has become internationalized.
Internationally, it is common practice to use market-oriented approaches to solve operational challenges. Establishing the China Automobile Parts Manufacturers Association would help address the rapid growth of multinational companies and ensure the long-term development of China’s auto parts industry. This requires real self-regulatory bodies within the industry.
Currently, many automotive industry organizations are dominated by整车 manufacturers, and there is no true representative body for the parts sector. In countries like Japan, the Auto Parts Manufacturers Association is completely independent. In the U.S. and Germany, similar associations are well-developed. Given China’s full integration into the global market, it is imperative to manage the industry according to internationally accepted standards. Therefore, China’s auto parts manufacturing industry needs its own association.
Reporter: Could you share some specific suggestions or ideas?
Shi Hong: The Chinese auto parts manufacturing industry must have its own association. It is essential to establish an independent “China Automobile Parts Manufacturers Association.†With a strong industry organization, we can take full advantage of national development opportunities to create a favorable environment for enterprises. For example, we can build a market environment conducive to peaceful coexistence and harmonious development; provide companies with information, market, and technological insights; and support their growth through industry exchanges and global expansion.
In the near future, we recommend organizing a forum for Chinese auto parts manufacturers, bringing together representatives from major companies to discuss their views on the industry’s development and their stance on establishing an independent industry organization.
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