Fourth, how domestic auto parts companies can adapt to the restructuring of整车 (whole vehicle) manufacturers and the adjustment of procurement policies. The auto parts industry is the cornerstone of the automotive sector, while整车 companies are the leaders driving the industry forward. With the ongoing reorganization of整车 companies, global procurement strategies, systematic R&D, and modular supply chains, Chinese auto parts firms must find new ways to develop and align with the evolving needs of vehicle manufacturers. This is a crucial challenge that current auto parts companies should carefully address.
We believe that it's essential for these companies to take action in several key areas. First, they should promote marketization and gradually move toward a more neutral, professional, and large-scale development model. The reorganization of整车 companies and their separation from parts suppliers have created an opportunity to break down regional and group protectionism, fostering a more open and competitive market environment.
Auto parts companies, especially leading ones in the spare parts industry, can leverage this environment to achieve cross-regional and cross-group support, thereby increasing production scale. Scale is vital for survival and growth in the future. Only through large-scale production can companies gain cost advantages and meet the low-cost procurement requirements of整车 manufacturers.
With the reorganization of整车 companies as a driver, China’s auto parts enterprises should also undergo joint reorganization, forming several large-scale auto parts groups. Under government support, the domestic vehicle manufacturing sector has already established a “3+6†market structure after years of adjustments. Similarly, the auto parts industry needs to integrate, merge, and reorganize to optimize resource allocation and create a “pagoda-like†industry structure led by major groups, meeting the demands of systematic and modular development.
Second, it's important to fully utilize the comparative advantages of China’s auto parts industry. Companies should rationally adjust their product structures and increase R&D efforts. For products that are critical for model introductions or key assemblies affecting overall vehicle performance, focused development is essential. For labor-intensive products with existing competitive advantages, companies should continue to grow and strengthen them. For high-tech products with potential demand in the domestic market, investment and development should be prioritized. Gradually, several major system development centers and platforms should be established.
Third, actively participate in the internationalization wave of the global automotive industry. With China’s WTO membership, the domestic auto parts market will become increasingly integrated with the global market. In the face of fierce competition, domestic companies must proactively engage in the global division of labor within the automotive industry to enhance competitiveness and build multinational auto parts groups. International cooperation in technology and markets is a wise choice for China’s auto parts industry. Through such collaboration, Chinese companies can access the technological, financial, managerial, and market advantages of multinational corporations, significantly improving their technical capabilities and economies of scale, and striving to secure a place in the global parts procurement system.
Lastly, in line with new procurement rules, companies should improve QCD (Quality, Cost, Delivery) management and enhance their core competitiveness. In many parts and components procurement processes, R&D capability, quality, cost, and delivery time have become the most critical and preferred criteria, and will play a central role in future competition. Core competence will determine a company’s long-term success.
As noted in an article from China Auto News, the combined reorganization of global parts suppliers and multinational corporations may have a more profound impact than the reorganization of major整车 companies. In the coming years, it may not be the整车 manufacturers that dominate the industry, but rather the parts and components companies. This prediction makes sense. It is well-known that China’s auto parts industry lags behind the整车 industry by over a decade. If we continue to rely on整车-driven development, the gap between the two sectors will only widen. Larger companies may struggle to improve parts technology, break quality standards, or master core technologies. Under the pressure of global procurement, the parts industry could suffer serious setbacks. At that point, China might become a big country in vehicle production, but a weak one in parts manufacturing, merely serving as an assembly base. This is something no one wants to see.
Dongfeng Auto Parts, like other major domestic auto parts companies, is committed to making the Chinese auto parts industry stronger and larger. It is willing to collaborate with all sectors to revitalize the Chinese auto parts industry as soon as possible.
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