Parts industry will experience a revolution in innovation
At the recently concluded "High-level Forum on China's Auto Parts Development Trends," Zhang Xiaojie, Vice President of the China Federation of Machinery Industry, provided an insightful overview of the development of the automotive and auto parts industry during the "Tenth Five-Year Plan" period. He also highlighted the future direction of the industry, emphasizing that the automobile component sector is moving toward a zero-emission and high-tech future.
Zhang summarized the achievements of the auto industry over the past five years using what he called the "three threes." The first "three" refers to the rapid growth of the three major digital automotive industries, which completed their goals three years ahead of schedule. Over the five-year period, production nearly tripled, and China's local manufacturing ranking rose from eighth in the world in 2000 to third by the end of the plan.
The second "three" outlined three key transformations within the industry. First, the auto sector began operating according to market principles earlier than many other industries, with product output, pricing, and market orientation increasingly determined by market forces. Second, after several five-year plans, the industry made a significant shift from relying on foreign technology to developing its own capabilities. Third, the trade landscape evolved from primarily importing vehicles to engaging in both import and export activities.
Zhang noted that when China joined the WTO, the auto industry was once considered one of the most vulnerable sectors. However, within just five years, Chinese automakers had fully met all WTO commitments, demonstrating remarkable progress.
Despite these achievements, Zhang pointed out some remaining challenges in the industry, which he also categorized into three areas: a lack of independent R&D and innovation capabilities, insufficient strong corporate groups, and limited access to capital and financial operations. He emphasized that the traditional model of self-financing through profits was no longer sustainable, and companies needed to explore new ways of raising capital to keep up with the fast-paced market.
Innovation in the auto parts industry, Zhang argued, is the foundation for broader automotive innovation. At the recent National Science and Technology Conference, General Secretary Hu Jintao set a long-term goal of making China an innovative country by 2020. This vision places greater strategic demands on the auto industry, especially in terms of technological leadership and competitiveness.
According to the National Medium- and Long-Term Scientific and Technological Development Plan, equipment manufacturing and information technology are critical sectors for national competitiveness, with the auto industry being a core part of transportation equipment. The plan emphasizes that enterprises should be the main drivers of innovation, guided by market needs and focused on original research, integration, and adaptation.
Zhang believes that for the foreseeable future, the strategy for the auto industry—both in整车 (complete vehicles) and parts—will focus on absorbing, adapting, and innovating existing technologies. He stressed that the innovation of the auto parts industry remains the cornerstone of the entire automotive sector’s independence.
He added that while China has become a major player in the automotive industry, becoming a true powerhouse depends on four key factors: the ability to independently develop products, the strength of the parts industry, support from related sectors, and a robust sales and service system. In this context, the auto parts industry will play a vital role in the next wave of competition.
Zhang also mentioned the importance of electric vehicles, which require new battery technologies and advanced braking systems. As the industry evolves, the parts sector will undergo a significant transformation.
Regarding the clustering and grouping of auto parts companies, Zhang explained that it involves two levels of concepts. It is not simply about forming group companies around certain parts, but rather about creating sustainable and competitive clusters. He suggested that China may achieve this through market segmentation and collaborative strategies rather than focusing solely on size.
Currently, there are three forms of auto parts clusters in China: one centered around main engine plants to improve logistics efficiency, another based on the inherent relationships between parts, and a third involving modular supply chains and system-level development, which can significantly reduce costs. Zhang believes the third form holds the greatest potential for the future development of Chinese auto parts enterprises.
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