China should learn from the experience of emerging auto parts countries and seek development
In recent years, multinational auto parts and components companies have entered the Chinese market, often integrating closely with domestic vehicle manufacturers. This has placed China's auto parts industry—already at a disadvantage in terms of capital, technology, management, and R&D—facing unprecedented challenges. As a result, Chinese auto parts companies are now forced to compete on the global stage alongside both developed and developing nations. To stay competitive, China can learn from other countries, drawing inspiration from the experiences of emerging economies and developing nations.
India: Cost Efficiency as a Competitive Edge
India has emerged as a major player in the global auto parts market, with many international automakers sourcing components from the country. According to the Indian Automobile Parts Manufacturers Association, India’s auto parts exports are expected to reach $20 billion within two decades. In the last fiscal year alone, exports rose from $578 million to $800 million—a 38% increase.
One of India’s key advantages is its cost efficiency. The country’s production processes are designed to be labor-intensive rather than capital-intensive, allowing for significant cost reductions. For instance, "de-automated" manufacturing techniques used in Western factories can cut component costs by up to 20%. Additionally, Indian engineers excel at redesigning products to reduce weight and development time. A notable example is the redesign of the Maruti Alto’s steering system, which reduced its weight by 15%.
Indian suppliers can also develop products quickly and efficiently. One company designed a steering system for an automobile manufacturer in just six months, while a similar project in other low-cost countries took over four years. As a result, many automakers have set up engineering and design centers in India. General Motors, for example, established a large research center in Bangalore, employing 2,300 professionals—more than its Shanghai facility and the largest outside the U.S.
Moreover, Indian workers offer high-quality labor at lower wages compared to many other countries. The quality of auto parts produced in India is considered superior to those from Mexico and South Korea, yet at prices that are 15% cheaper than Mexico and 10% cheaper than South Korea. This combination of quality and affordability makes India highly attractive to global automotive giants looking to cut costs. The availability of affordable raw materials like rubber and steel further strengthens this advantage.
South Korea: Balancing Quality and Cost
South Korea has become a leading auto parts manufacturer in Asia, driven by a combination of foreign investment and strong domestic automotive growth. Following the 1997–1998 Asian financial crisis, many Korean SMEs were taken over by foreign firms, which helped them improve product quality and operational efficiency. While Japan struggled with high costs, and China offered lower prices but less advanced designs, South Korea found a perfect balance between quality and cost.
The rise of Hyundai and Kia has also played a crucial role. Their combined sales increased by 12% last year, reaching 3.2 million vehicles, with three-quarters sold overseas. With such strong support from domestic automakers, the auto parts industry in South Korea has flourished, allowing it to compete globally.
China: Concentration and Integration as the Path Forward
To remain competitive, China must focus on concentration and integration. For critical components like engines, the government can implement entry barriers to prevent redundant production and overcapacity. At the same time, the state should encourage the formation of parts sales consortia, leveraging e-commerce and logistics networks to create large-scale distribution groups.
For example, a diesel engine parts consortium has already been established, helping to regulate pricing and drive market growth. In the future, the government plans to consolidate the total number of parts factories into 2–4 major entities, with smaller plants shifting to labor-intensive components like brake discs and friction materials. This will help absorb displaced workers and maintain employment. Meanwhile, complex or small-batch components, such as rubber gaskets, may be imported directly instead of being produced domestically.
By learning from global examples and implementing strategic reforms, China’s auto parts industry can strengthen its position in the global market.
Wuxi NEST Biotechnology Co.,Ltd , https://www.nest-biotech.com