Auto parts industry is facing "big reshuffle" supporting companies bear the brunt

The newly issued State Council plan for revitalizing the automobile industry sets a clear goal of restructuring the sector. Through mergers and acquisitions, the aim is to create two to three large-scale automotive groups with production and sales volumes exceeding 2 million vehicles annually, while cultivating 4 to 5 companies reaching over 1 million units in production and sales. Currently, 14 automakers hold more than 90% of the market share, but this number is expected to drop below 10. As a result, the internal supply chains of all vehicle manufacturers will face significant changes, marking a major transformation for the auto parts industry. In this wave of consolidation sweeping the automobile sector, suppliers offering single-product lines or low-technology components are at the highest risk of being phased out. Chen Wenkai, president of Gasgoo.com, a leading e-commerce platform for the automotive industry in China, noted that the survival of the fittest in the supply chain is already underway. Some private parts companies with strong technical and financial capabilities are likely to join the supply system and form larger groups. Meanwhile, traditional small and medium-sized suppliers must quickly adapt their market strategies and product structures to survive. Under these conditions, how can small and medium-sized suppliers achieve meaningful growth? Chen Wenkai suggested that companies should explore both export markets and the aftermarket. Their long-term experience in supporting original equipment manufacturers has given them valuable manufacturing expertise and quality control, which can serve as a solid foundation for expanding into overseas markets and after-sales services. According to Gasgoo.com research, as many as 86% of international buyers prefer suppliers with domestic experience, and after-sales buyers are particularly interested in reliable component providers. The global auto market remains sluggish, prompting European and American automakers to increase purchases from low-cost countries. Data shows that the aftermarket is gaining attention from both suppliers and buyers, with more procurement activities coming from China. In the past three months, most of the world’s top ten suppliers have been actively sourcing products through Gasgoo, with a heavy focus on after-market components. While some traditional suppliers face uncertainty, the new energy vehicle (NEV) parts sector is expected to see a "spring." The industrial plan clearly supports the rapid development of NEVs and their components. This policy-driven momentum is boosting confidence among parts companies and encouraging traditional manufacturers to invest in new technologies, products, and processes. This emerging trend is expected to become a key highlight in China’s auto industry in the coming years. The plan also emphasizes accelerating the construction of export bases for automobiles and parts. According to Chen Wenkai, with the introduction of policies promoting exports, Chinese auto parts companies are expected to recover in the third and fourth quarters of 2009, with purchasing activity reaching a peak. “This is a critical period for enterprises to adjust their production strategies and mental attitudes,” he said. Companies should focus on long-term development, make strategic adjustments in R&D, production, and management, and work toward product and customer diversification, especially by actively entering international markets to navigate this adjustment phase smoothly.”

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