Suppliers Scramble to Tap Huge Auto-Parts Market in Southern China

Thanks to the rapid economic development that has kept it a step ahead of most other regions, Southern China has emerged as one of the country's biggest auto-parts markets, sparking fierce competition among domestic and foreign suppliers alike.

Two main reasons for the large demand for auto parts in Southern China is its huge auto ownership and the existence of a well-established auto manufacturing industry there. Statistics show that Southern China accounts for over 35% of China's total auto sales, and the region absorbs around one-third of the sales of China's domestic major automakers. For assemblers of Japanese-brand autos, the Guangzhou market alone takes 55.2%. The huge market potential is attracting carmakers that have been lagging in Southern China, including FAW Volkswagen, China's largest automaker, which currently has only 5% of the market there.

To tap this huge market potential, auto-parts suppliers need to take advantage of the multi-function "auto-parts cities," or clustered auto-parts outlets, which have been replacing traditional marketplaces to become the mainstream sales channel for auto parts in China.

For instance, Liyuan Automobile Subassemblies City, located on Yongfu Road in Guangzhou City, is an important wholesale auto-parts and accessories base for all of China, especially parts and accessories such as transmission shafts, shock absorbers, and brake disks for major brands including Mercedes Benz, BMW, Land Rover, Toyota, and Honda.

South China International Auto Parts City is another prominent example. It focuses on the local market but also reaches into to Southern China and neighboring countries. It is a multi-function marketplace, consisting mainly of chain stores that supply auto parts mostly for major brands, including engines, braking systems, steering systems, clutches, transmission systems, dashboards, accessories, safety products, and auto body parts.

Yuehua Automobile City is the largest of all the auto parts and accessories marketplaces in Southern China, as well as the largest source of aftermarket auto parts in Shenzhen. It accommodates many repair garages as well as auto beautification and maintenance chains, 4S (sale, spare parts, service, and survey) stores, auto-parts outlets, auto parts and accessories boutiques, and stores selling auto travel gear, race-car products, and all-terrain-car products.

Spurred by the huge local demand, Guangzhou has witnessed the development of three major auto manufacturing bases: an Auto R&D Area, Huadu Area, and Nansha area. The production value of the local auto-parts industry, though, amounts to only 31% of the production value of the local auto industry, far below the 1:1.7 average ratio for the global auto and auto-parts industries. Industry insiders fear that the lagging development of the auto-parts industry in Southern China will greatly hamper the efforts of the local auto industry to cut costs and expand the scale of its production.