Parts industry will experience a revolution in innovation

At the recently held "High-level Forum on China's Auto Parts Development Trends," Zhang Xiaoji, Vice President of the China Federation of Machinery Industry, provided an in-depth overview of the development of the automobile and auto parts sectors during the "10th Five-Year Plan" period. He also shared insights into the future direction of the industry, predicting that the automotive component sector would eventually move toward zero reliance on foreign technology. Zhang summarized the achievements of the "10th Five-Year Plan" using three key points. The first was that the three major automotive industries completed their five-year goals three years ahead of schedule, with output nearly tripling over the five-year span. Local production rankings improved significantly, rising from eighth in the world in 2000 to third by the end of the plan period. The second point highlighted three major transformations: First, the industry had already begun operating under market-driven principles, with product output, pricing, and market orientation largely determined by market forces. Second, after several years of effort, the industry transitioned from relying on foreign technology to developing its own. Third, the trade model evolved from a focus on imports to a balanced import and export strategy. Zhang noted that when China joined the WTO, the auto industry was seen as one of the most vulnerable sectors. However, in just five years, Chinese automakers had met all WTO commitments, demonstrating significant progress. Despite these achievements, he pointed out three key areas needing improvement: lack of independent R&D capabilities, absence of strong industry groups, and limited access to capital and financial resources. He emphasized that traditional models of self-financing through profits were no longer sufficient for the rapidly growing industry, and new forms of capital integration would be essential. Innovation in the auto parts industry is fundamental to the broader automotive sector’s development. At the National Science and Technology Conference, General Secretary Hu Jintao set a goal for China to become an innovative nation by 2020, placing greater strategic importance on technological advancement. Zhang stressed that equipment manufacturing and information technology are critical to national competitiveness, with the auto industry playing a central role. He emphasized that for a long time, the strategy for the auto industry—both in terms of components and overall development—would involve absorbing, adapting, and innovating existing technologies. Innovation in the parts sector, he said, is the foundation for achieving true independence in the automotive industry. China has become a major player in the global auto industry, but to become a true powerhouse, it must focus on four key areas: independent innovation, a strong parts industry, support from related sectors, and a robust sales and service system. In the next wave of competition, the parts industry will play a crucial role, especially in emerging fields like electric vehicles, where new batteries and advanced braking systems are essential. Regarding the grouping and clustering of auto parts companies, Zhang explained that this concept involves more than just forming large conglomerates. True industry consolidation requires time and strategic market segmentation rather than simply focusing on size. He identified three types of clusters in China: those centered around main engine plants, those based on functional relationships between parts, and those formed through modular supply chains and system development. Among these, the third type holds the greatest potential for long-term growth and efficiency. Overall, the forum highlighted both the progress made and the challenges that lie ahead for China’s auto industry as it strives to become a global leader in innovation and manufacturing.

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