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China’s auto parts industry grows, in spite of pandemic setbacks

May 1, 2022
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Why this is important to Wisconsin businesses: Vehicle and parts exporters may want to consider market opportunities in China.

Recent outbreaks of the COVID-19 omicron variant across China have forced several auto parts factories to suspend part or all of their production for periods of time—but auto industry sales forecasts for 2022 are still upbeat, according to the Global Times.

Since 2011, China’s auto parts industry has doubled in revenue, from ¥2.0 trillion ($293.3 billion USD) to ¥4.1 trillion ($601.3 billion USD). Expansion of the auto manufacturing industry in China and growing consumer demand for new vehicles have steadily boosted auto parts sales.

During the first eight months of 2021, China imported ¥329.8 billion ($48.9 billion USD) worth of auto parts, most of which came from Japan, Germany and the U.S. The key imported parts were transmissions, clutches and steering systems.

The huge aftermarket is expected to become the focal point of the auto parts industry. Demand for parts for used cars and trucks is gradually increasing in China, and government requirements call for an increasing level of quality, but bottlenecks remain in domestic manufacturing of energy-saving components and auto parts connected through the Internet of Things.

Among traditional fossil-fueled vehicles, engines, gearboxes, axles and other core components are imported primarily from foreign auto giants. In the emerging fields of autonomous vehicles and electric vehicles, sensors, intelligent decision-making systems, controller processing chips, active braking and active steering systems rely on imports as well.

With China’s emphasis on a low-carbon economic development program, the demand for electric cars is surging, an expert told the Global Times, and that should keep vehicle sales strong. To give residents an incentive to buy electric cars, China lowered the tariff on brakes imported for electric or hybrid vehicles from 6% to 5%. Import tariffs on other auto parts, such as torque converters, were lowered from 6% to 3%. These changes took effect in 2020.

Wisconsin is a prime source for auto parts; vehicles and parts ranked fifth among Wisconsin exports in 2021.

Manufacturers with expertise in auto parts manufacturing may want to explore opportunities in China. Exporters should pay attention to the tax rates, as tariffs may change with little warning.

 

 

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