Chinese Government React to Blind Expanding Auto Parts Multi-national Enterprises

According to iAbrasive latest news, Chinese government is likely to make amendments to "Automobile Industry Development Policy". iAbrasive reporter holds that whether the government is to abolish auto industry joint share or make policies concerning merger & acquisition, compared with auto parts joint ventures, the new edition of "Automobile Industry Development Policy" shall first of all have control over foreign auto parts enterprises blind expanding in China. Relevant regulation is required to protect Chinese auto parts industry from being destroyed.

In 2001 when China joined in WTO, little restricted regulations were made concerning auto parts joint-venture share proportions. The dominant stockholder was mostly foreign enterprises. Statistics from China Ministry of Commerce reveals that foreign capital have controlled China auto parts most market share. In 2012, sales revenue from China-made auto parts depending on domestic capital only covered 20% to 25% of the whole industry, while foreign invested auto parts manufacturers accounted for more than 75% of Chinese market. That leaves china auto parts companies a rather tough situation to survive.

The reasons can be summarized as follow: Chinese independent auto parts companies stay at low-end market of the value chain; they have limited shares and have no access to high and new technologies. Profitable auto parts markets of high-end products and core techniques have been in the charge of foreign enterprises, existing in the form of co-invest or exclusively-owned, to which Chinese companies have little access.

For example, one of the largest auto parts supplier in the world--TRW Automotive Holdings Corp. has established over 20 OE joint ventures of different products in China. DELPHI is the largest wiring system manufacturer in the world, as well as the top 500 and a listed company in NYSE. At present, DELPHI subsidiaries accessory series have become supplier to almost every renowned auto OEMs, including FAW Volkswagen, General Motors, Shanghai Volkswagen, NISSAN, CHERY, etc.

To enhance china auto parts industry, the government shall formulate and supervise strategic policies targeting at foreign exclusively owned auto parts enterprises, and restrain blind foreign expanding. Faced with heavy pressure, China auto industry is proceeding towards energy-saving and developing new energy. Whether China auto parts industry can catch up with industry upgrading trend and improve comprehensive company competition power are crucial for the industry to survive.