Realizing the asset restructuring of the product chain is an inevitable choice for the industrialization of spare parts industry

On November 16, Zhang Xiaoji, Chairman of the China Association of Automotive Engineers, delivered a keynote speech titled “Implementing the Scientific Outlook on Development and Promoting the Industrialization, Marketization, and Internationalization of Automotive Components” at the “China Automotive Industry Development Summit Forum and China Automotive Parts Entrepreneurs Annual Meeting” held in Guiyang. In his address, Zhang emphasized that the path of industry consolidation is an essential step in the structural adjustment of the auto parts sector. However, he clarified that this consolidation does not mean forming large conglomerates focused solely on producing similar components. Instead, it should be centered around the automotive parts supply chain, aiming to achieve asset restructuring and operational optimization. Zhang provided an in-depth analysis of the current state of China’s auto parts industry. According to recent data, China is home to over 2,000 auto parts companies, with an annual industrial output value of approximately 400 billion yuan (compared to the national automotive industry's total output of 16,000 billion yuan). These companies employ about 1 million people (out of 1.8 million in the broader automotive sector) and hold assets worth 400 billion yuan (compared to 1.4 trillion yuan for the entire industry). The annual profit from the auto parts sector stands at 30 billion yuan, while the entire automotive industry is expected to generate 750 billion yuan this year. This has led to the formation of a relatively independent and robust auto parts industry. He noted that China’s auto parts industry has largely met the needs of domestic vehicle manufacturing, with the localization rate of imported auto products reaching over 40% on average. For some mature products, this rate has climbed as high as 60% to 80%. Additionally, the export value of Chinese auto parts has reached 10 billion U.S. dollars, reflecting growing international competitiveness. Despite these achievements, Zhang pointed out two major gaps between China’s auto parts industry and global leaders. First, there is a significant gap in system-level development capabilities, particularly in synchronizing with original equipment manufacturers (OEMs) in R&D. As a result, modular supply remains challenging. Second, the research and development (R&D) capabilities of automotive electronic components are still limited. Although progress has been made in areas like airbags and ABS systems, China has yet to achieve substantial scale in these fields. Its market share—both domestically and internationally—remains small, especially when compared to multinational giants. In line with the central government’s emphasis on independent innovation, Zhang outlined three key tasks for the auto parts industry: first, innovating based on technology introduction; second, integrating both domestic and international technological resources to drive innovation; and third, pursuing original innovation for critical technologies that cannot be acquired through purchase. Zhang also stressed that while there are no shortcuts to developing the auto parts industry, building a solid foundation is crucial. Specialization, mass production, and high technical standards are essential for the long-term growth of the sector. Leveraging advanced foreign technology while improving local R&D capabilities will help elevate the quality and technical level of China’s auto parts, setting a new benchmark for future development. Finally, Zhang highlighted the importance of the auto parts industry as a vital component of China’s broader automotive sector. Without the collaborative efforts of parts suppliers, achieving the goal of becoming a global automotive power would be impossible. He concluded by reiterating that the transformation from a major car manufacturing country to a true industrial powerhouse is a critical challenge, and industry consolidation remains a necessary step in this journey.

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