[Shanghai Auto Show] The number of parts companies in China will continue to grow
Recently, China's automotive parts and components industry has faced significant challenges due to the economic crisis. In addition to prolonged periods of low profit margins and limited technological advancement, many companies have called for consolidation as a means of survival. They argue that, similar to what has happened in foreign markets, the number of parts manufacturers will gradually decrease over time. For instance, in the U.S., from 1929 to 1989, the number of auto companies dropped from over 140 to just 20.
However, this trend is not evident in China. Unlike the U.S., where the market has become more standardized and consolidated, the Chinese parts industry is becoming increasingly complex and chaotic. Ni Xie, Vice President of ASIMCO, explained that while the number of spare parts companies isn't decreasing, the market is growing in both size and disorder.
According to statistics, the number of spare parts enterprises in China has grown from 25,000 in the mid-1990s to over 30,000 today, with an average of at least 500 new companies added each year. Meanwhile, the number of vehicle manufacturers has also increased—from 110 in 1994 to 124 today.
It's difficult to determine the exact number of parts companies in China, but it's estimated that there are at least 20,000 in Zhejiang Province alone. For example, there are over 450 motor manufacturers operating in the country, and more than 50 piston ring companies around Yizheng Shuanghuan. As a result, the market is filled with both high-quality and substandard suppliers. Among the 124 vehicle manufacturers, only the top 10 capture 90% of the market share, leaving the rest to compete in smaller segments.
"The uneven development of China's economy means the market won't be as clear-cut as in Europe," said Ni Wei. "Instead, it's a multi-layered, mixed market with diverse needs. This creates a highly complex structure requiring different types of suppliers."
At the Shanghai International Spare Parts Expo, domestic diesel engines displayed a wide range of standards—some meeting Euro IV levels, while others still offer Euro III, Euro II, or even Euro I and Euro 0. This diversity means that if a manufacturer can't produce the latest technology, they can still supply older models and remain competitive.
China produces about 40 million engines annually, including nearly 10 million for cars and commercial vehicles, and around 30 million for motorcycles, agricultural equipment, construction machinery, and marine use. If a company can't supply car engines, it can still provide engines for other applications.
"With China's sustained economic growth and the rapid expansion of the automotive sector, demand for parts and components will continue to rise," said Ni Wei. "This means the number of manufacturers may not decrease—it could actually increase."
Moreover, new players are entering the industry from various sectors, such as home appliances, air conditioners, and even food and beverage industries. This diversification leads to a growing variety and volume of parts and components.
According to data from the China Association of Automobile Manufacturers, the total output value of the auto parts industry reached 539.7 billion yuan by the end of 2006, rising to 670 billion yuan in 2007, and reaching nearly 948.75 billion yuan in 2008. The industry has been growing at an average annual rate of 30% to 40% in recent years.
Additionally, factors like local protectionism, state-owned enterprise systems, and the maintenance of large supplier networks have created an environment with insufficient competition. This allows lower-tech and less competitive products to persist for longer periods, enabling some subpar companies to survive.
"In 50 years, China's spare parts manufacturers may eventually follow international trends and see a decline," said Ni Wei. "But not yet."
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