Staggering Forecast for China Auto Parts Market an Opening for New Business Models

BERKELEY, Calif., May 4, 2004 -- 2003 was a remarkable year for the automobile market in China. Car production grew 80 percent and domestic car sales soared nearly 70 percent over the year before. During 2003 the total import to China of cars and car parts grew 86 percent over 2002. China now ranks fourth in automobile production and third in automobile sales in the world.

Demand-Driven Growth of Auto Parts Market

The sales growth is creating corresponding demand growth in the OEM and after-sales markets. Auto parts manufacturers now in China can sell into both domestic and export markets, giving the competing advantage to many companies.

Fragmentation

The environment for auto parts makers in China is rapidly changing. Currently, there are about 57 car parts manufacturers that make up about 45 percent of the industry. Among them, 10 are state-owned enterprises, 22 are JV stock companies, 10 are privately operated and 15 are joint capital enterprises. Not only do foreign auto parts makers seeking suppliers now have a vibrant and diversified selection of flexible and world-class resources to choose from but this shows that the state ingredient in the industry is abating and that the door is open to different business models.

Policies

China's emergence as a major auto parts manufacturing center shows no sign of slowing down. It's being further supported by a reduction in import tax rates for parts. Tariffs have been halved creating favorable conditions to stimulate the growth of this segment to the industry. By 2006 the average customs duty will have been reduced to 10 percent.

Great Opportunity for New Business

Rapid growth, fragmentation and positive government policy translates into a tremendous period of opportunity for auto parts manufacturers to enter the China market via acquisitions, joint venture or direct investment.

PRCDirect has completed a survey of auto parts manufacturing operations in China, gathering detailed information regarding resources available in specific product categories. Companies interested in more information about China's auto industry opportunities should contact Moon Mei in China (Moon.Mei@prcdirect.com.cn) or Tina Bachemin in the U.S. (Tina.Bachemin@prcdirect.com).