The restructuring of the automotive industry chain is creating new opportunities for component suppliers, as electrification and intelligentization are the prevailing trends.
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Release Date:
2020-11-03
At the 2020 China Automotive Supply Chain Conference held recently, attendees noted that the automotive industry chain is undergoing accelerated restructuring, creating new development opportunities for component suppliers. Particularly amid the significant opportunities presented by the “new four modernizations” of the automobile—electrification, intelligence, connectivity, and sharing—the industry must focus on innovative advancements in electrification and intelligent technologies, strive to master core technologies, overcome critical bottlenecks, accelerate cross-sectoral integration, and seize emerging growth prospects.
Ensuring the security of the industrial chain
It is worth noting that the China Automotive Supply Chain Conference was formerly known as the “China Automotive Components Industry Annual Conference and Summit Forum.” Industry insiders point out that this year’s change in the event’s name, to some extent, reflects a fundamental enhancement in our understanding of the industry’s development patterns and in our capacity to drive its growth.
The automotive industry chain is long and vertically integrated, with broad cross-sectoral convergence. Building a smooth and secure industrial and supply chain is the cornerstone of the automotive industry’s development.
According to Fu Bingfeng, Executive Vice President and Secretary-General of the China Association of Automobile Manufacturers, in today’s era of rapid advances in electrification, intelligence, and connectivity, the automotive components industry is poised to seize even broader opportunities for innovative development. “We boast the world’s largest automotive consumer market and a relatively complete manufacturing ecosystem. At present, more than 50 percent of global automotive component production is linked to China, and the world’s leading auto‑parts giants have all invested in establishing plants here. They view China as a manufacturing hub that serves Asia and extends its reach worldwide, with most locating their R&D and testing centers in the country. Localized integration of vehicle‑level technologies has already achieved parallel development, providing a powerful impetus for innovation in component technologies.”
Li Shaohua, Deputy Secretary-General and Director of the Industry Development Department of the China Association of Automobile Manufacturers, stated that during the planning and research process, great attention has been paid to the development of the industrial chain, the supply chain, and the automotive components sector. Based on the current trajectory, the performance of the components industry remains aligned with that of the broader automotive sector and has entered a phase of fluctuating adjustments. At the same time, the cluster effects within the industrial chain are particularly pronounced.
Li Shaohua stated that one of the defining features of the industry today is the emergence of component‑manufacturing clusters centered around major vehicle manufacturers. Local governments’ efforts to foster specialized component‑industry clusters have also laid a solid foundation for robust regional industrial ecosystems. At present, the entire industrial and supply chains have developed a degree of vertical integration; in particular, despite the shock of the COVID‑19 pandemic earlier this year, China’s automotive supply chain has demonstrated remarkable resilience, further enhancing the industry’s ability to withstand risks.
Regarding the development of the automotive industry chain, industry insiders emphasize the need to refine and streamline the supply chain, ensuring it is sufficiently robust to function smoothly and sustainably, while safeguarding its resilience and security. The industry chain must be healthy and self-reliant, leveraging advanced technologies to bolster its growth. It should also continue to expand, fostering inclusive and coordinated development. Moreover, the supply chain must be well‑coordinated and highly efficient, achieving complementarity and integration—balancing quality with scale.
The automotive industry is currently one of the largest single-product sectors in China’s manufacturing landscape and also one of the most closely watched industries, playing a vital role in national economic development. Chen Bin, Executive Vice President of the China Machinery Industry Federation, stated that auto parts lie at the heart of supply-chain security and form the very foundation of the automotive industry. “Since the launch of reform and opening-up, one of the greatest achievements of China’s automotive sector has been the remarkable growth of its auto-parts industry, which has underpinned the Chinese automotive industry—now the world’s largest in terms of both production and sales—for more than a decade, while also supporting the development of joint‑venture brands and the rise of domestically owned Chinese automakers.”
Huge development opportunities
In recent years, China’s automotive industry has made significant strides. Within this sector, the auto parts industry has played a crucial supporting role. Among China’s automotive exports, auto parts account for a dominant share.
Li Shaohua pointed out that China has become the world’s largest new‑car market, with its vehicle stock continuing to grow. Alongside this market expansion, China’s automotive manufacturing and product‑technology capabilities have aligned with international standards, while electrification and next‑generation information technologies are driving the industry’s next phase of development. In particular, the rapid growth of new‑energy vehicles has laid a solid foundation for further progress. Moreover, overseas operations in both complete vehicles and components are advancing steadily, total import and export volumes are rising, and a number of component firms with comparative advantages are expanding in scale and have begun integrating into global supply chains.
Li Shaohua stated that the new round of technological revolution has opened up vast opportunities and boundless prospects for industrial transformation. While the COVID‑19 pandemic has heightened the challenges of this transition, it has also accelerated the pace of change across industries. Looking ahead, the automotive sector is poised to undergo profound transformations spanning the supply chain, product offerings, marketing strategies, and manufacturing processes. Transformation, innovation, integration, and openness will define the future trajectory of the automotive industry.
Among these trends, software is reshaping how automotive functions are defined, while new avenues such as mobile energy storage, data services, and information platforms are expanding profit margins across both complete vehicles and components, creating opportunities for firms throughout the industry chain and supply chain. Moreover, the restructuring of the industrial ecosystem is opening up prospects for innovative growth among component suppliers, and the emergence of an increasing number of car‑centric ecosystems is injecting fresh vitality into the traditional automotive sector. Cross‑industry integration and mutual empowerment will become one of the key drivers of future industry development.
According to industry insiders, the electrification and intelligentization of automobiles have become an irreversible trend and represent a historic opportunity for China’s automotive sector to move from catching up to surpassing—and ultimately leading—global standards, reshaping the industry’s supply chain landscape. This transformation will open up broader and more diversified avenues for growth, creating new opportunities for domestic and international enterprises across production, services, R&D, and other sectors.
Accelerate addressing weak links.
At present, although China’s automotive components industry has made significant progress, there remains substantial room for improvement. “Overall, the key to building a secure and controllable automotive industrial chain lies in accelerating the development of the components sector—addressing its weaknesses while strengthening its strengths—and guiding it toward the mid- to high-end segments of the value chain, thereby providing robust support for the sustainable and healthy growth of China’s indigenous automotive brands,” said Chen Bin.
Chen Bin stated that insufficient industrial integration is one of the key factors contributing to challenges in China’s automotive industry chain. The bottlenecks in this chain are emblematic of broader weaknesses in China’s manufacturing sector. In particular, three critical areas—industrial‑grade materials, industrial software and control systems, and specialized production equipment and testing systems—remain heavily dependent on foreign suppliers.
To this end, Chen Bin recommends that we dismantle industry silos, foster cross-sectoral integration, and reduce the barriers between disciplines and departments. By breaking down sectoral boundaries and fragmented resource allocation, we should open up corporate “walled gardens,” promote collaboration and co‑innovation among the automotive industry and related sectors such as software, materials, and new‑energy industries, address R&D gaps in multidisciplinary areas, and strive to achieve breakthroughs in automotive electronics and mechatronic components.
In addition, vehicle manufacturers and component suppliers must engage in collaborative innovation, fostering a spirit of mutual support and a keen sense of shared vulnerability. They should maintain strong ties between the whole‑vehicle sector and the parts industry, thereby building a secure and controllable industrial chain. With users, enterprises, automakers, and component makers taking the lead, and with concerted efforts from industry, academia, research institutions, and end‑users, we must break through bottlenecks in specialized automotive manufacturing equipment and dedicated testing systems. Relevant government departments should establish a streamlined special program for the industrial chain, systematically identify all impediments and inefficiencies along the automotive value chain, compile a comprehensive inventory, and work together to drive integrated innovation.
Some industry experts also note that, in critical Tier‑2 components and raw materials such as automotive‑grade chips, sensors, and rubber, our structural weaknesses and bottlenecks have become even more pronounced since the pandemic. We must fully leverage the roles of the Advanced Manufacturing Industry Investment Fund, the National Manufacturing Transformation and Upgrading Fund, and other mechanisms, harnessing market‑based approaches to steer investment, and work in concert with enterprises to generate more innovative breakthroughs, thereby advancing the high‑quality development of China’s automotive industry chain and leading a new wave of global automotive‑parts innovation.
At the same time, component‑manufacturing firms must strengthen their awareness of integrating into the ecosystem, leverage their traditional strengths, and harness new technologies and business models to drive transformation and upgrading, thereby seizing a competitive edge in the restructuring of the industrial value chain.
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