Domestic manufacturers are struggling to reshuffle their accessories industry

The auto parts industry is the backbone of the automotive sector, and its development is closely tied to that of the entire vehicle industry. While the automobile industry has seen rapid growth, the auto parts industry has not kept pace, creating a bottleneck in the overall development of the sector. Many Chinese auto parts companies operate on a small scale, which limits their ability to achieve economies of scale. As a result, they struggle with technological innovation and product development due to constraints in capital and technology. This lack of mass production capability hinders both their own progress and the advancement of the broader automotive industry. One of the main reasons for this lag is the underdeveloped state of spare parts production. Additionally, Chinese auto parts companies have not yet established a large-scale cost advantage across the supply chain—whether in raw material procurement, process control, or sales and distribution. Many companies suffer from an unbalanced product structure and overcapacity, leading to idle assets and rising fixed costs. With minimal investment in R&D, the cost of direct procurement in China’s vehicle manufacturing often exceeds 60%, and in some cases, even reaches 80%. This puts significant pressure on auto parts suppliers, as price reductions in vehicles are largely driven by cost cuts in the parts industry. From a broader perspective, the competition within the automotive industry impacts the efficiency of the parts sector. China’s auto parts industry remains heavily reliant on labor, despite having abundant low-cost labor. However, poor management practices reduce the effectiveness of this advantage. The gap in production efficiency between Chinese auto parts companies and global leaders is even wider than in the整车 (whole vehicle) industry. In terms of industrial restructuring, competition is likely to drive changes in three key areas: First, foreign-owned and Sino-foreign joint ventures will gain a larger market share, not only meeting domestic demand but also exporting to international OEM markets. Second, the traditional model of internal procurement, dominated by the "Big Three" automakers, will gradually break down as Chinese joint ventures seek the best suppliers nationwide. Third, domestic parts suppliers are moving toward two main directions: becoming integrators or specialized component manufacturers. This will lead to a clearer supply hierarchy, with many companies lacking both integration capabilities and professional expertise. Looking ahead, the auto parts industry will undergo a reshuffle, but this will be a gradual process influenced by shifting supply and demand dynamics. The critical question now is: What economic policies and management strategies will the government adopt to support the healthy development of China's auto parts industry? How can the current fragmented industrial structure and Sino-foreign collaboration model be improved? And how will the KD (knock-down) trend post-WTO accession be managed? While the future of the auto parts industry depends on the efforts of individual companies, it also relies heavily on effective macro-level guidance from the government.

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