Innovation promotes the domestic auto parts industry in China to create challenges to international barriers
In the global automotive industry value chain, auto parts account for nearly half of the total value. China has emerged as a major production hub for automotive components. In 2004, the growth rate of value added in China's auto parts sector outpaced GDP growth, with total industrial output reaching 318.8 billion yuan and market sales amounting to 310.2 billion yuan.
Looking ahead, the auxiliary market is expected to grow at an average rate of 15% or more over the next five years, while the aftermarket will see an annual increase of around 10%. In 2005, the Ministry of Commerce aimed to boost exports of automobiles and auto parts, targeting a long-term goal of exporting between $70 billion and $100 billion worth of products by 2010.
According to statistics, only 22% of patented technologies in China’s auto parts industry come from local companies, while 78% are from joint ventures. Internationally, Japanese companies hold the largest share of patents at 50%, followed by European manufacturers at 19%, and U.S. firms at 29%. Chinese companies, however, hold less than 2% of these patents, highlighting a significant technological gap.
Despite equal capital investment in joint ventures, foreign partners often control core components and capture the majority of profits—sometimes as high as 80%—leaving Chinese partners with smaller shares. This dynamic has led to low-tech, labor-intensive products from domestic suppliers, with many focusing on non-core, decorative parts rather than critical components.
To break through these barriers, Chinese auto parts companies must innovate and move up the value chain. One such example is Jiangsu Gelton Transmission Co., Ltd., led by Sun Hanbin. The company has developed advanced technologies with independent intellectual property, including anti-collision and energy-absorption devices, brake adjusting arms, and nylon coating processes. These innovations have earned them 25 national patents and recognition as key new technology products.
With traffic accidents in China causing over 100,000 deaths annually, improving braking systems is crucial. Gelton’s collision avoidance system, which absorbs impact energy through the steering mechanism, has been widely adopted in various vehicle models, including those from Dongfeng and Futian.
Another strategy involves leveraging international partnerships. Jiangsu Tailong Group, a top machinery enterprise, formed a joint venture with Italian firm Brevini. This collaboration aims to produce high-end transmission equipment and enhance China’s position in the global market. According to Mr. Yin Genzhang, the alliance helps improve product quality, brand reputation, and competitiveness.
With increasing demand for high-end transmission equipment, Chinese companies must continue investing in innovation and strategic partnerships to avoid losing market share to foreign competitors. By combining domestic strengths with global expertise, the future of "Made in China" auto parts looks promising.
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