Auto-Parts Exporters in China Buck Global Downturn in 2008

With many export-reliant suppliers worldwide struggling to stay afloat during the global recession and, especially relevant, considering that the Big Three American automakers are floundering, auto parts exporters in China have been showing resilience: auto parts shipped abroad grew 31.3% to US$11.56 billion in the first three quarters of 2008, according to customs statistics.

China's Auto-Parts Exports in First 3 Quarters (2004~2008) Unit: US$100 M.
Year	2004	2005	2006	2007	2008
Export value	14.7	47.4	64.5	88.3	115.6
Growth		222%	36%	37%	31%

While the growth rate remains remarkable, the growth momentum of auto parts export out of China has not escaped the impact of the deteriorating global financial crisis and resulting credit crunch, hence reduced demand. Auto parts exports grew only 18% year-on-year to US$1.32 billion in September, a far cry from the 42% growth for that in 2007; while exports to the U.S. only inched up 1.6%, compared with 23.6% to the European Union.

Mainly Finished Auto Parts

The lion's share of exports of China-made auto parts were transacted via traditional means or as complete products, jumping 34.9% to US$9.04 billion and accounting for 78.2% of the total during the first three quarters of 2008, while auto parts exports involving delivery of processing services grew 20% to US$2.34 billion, for a 20.2% share.

Markets Worldwide

Made-in-China auto parts were shipped virtually globally in the first three quarters, including major markets in the U.S., European Union, Japan, and ASEAN (Association of Southeast Asian Nations), all of which accounted for 65.5% of the total exports. In line with many reports and predictions that Asia would remain relatively tenacious economically, auto parts exports to ASEAN jumped by 54.9% year-on-year, the highest, followed by a rise of 34.7% in shipments to the EU, 34.4% to Japan, and 7.1% to the U.S.. However in absolute terms, the U.S. and Europe led as the two major destinations, absorbing US$3.43 billion and US$2.11 billion, respectively.

Private Sector Outdo State Counterparts

Foreign-invested auto-parts suppliers in China exported US$5.95 billion of items, up 28.2% year-on-year, in the first three quarters of 2008, during which private enterprises achieved 51.5% export growth to US$3.42 billion, versus 12.4% and US$1.78 billion for state counterparts.

Mostly Low Value-added Items

Living up to its widely reported role of being the world's biggest factory, China mainly exported a range of low value-added auto parts: exports of auto wheels and parts grew 19.4% to US$2.61 billion in the first three quarters; brakes and parts advanced 28.1% to US$1.79 billion; airbags and parts jumped 77.7% to US$230 million; and gearboxes for sedans soared 180% to US$40 million.

Main Export Drivers

One of the drivers of the significant export growth in China-made auto parts in the first three quarters is the rising production and procurement by major automakers. Over 1,200 foreign auto-parts makers have invested in China, including 70 of the world's top-10.

Price Advantage

China-made auto parts still incredibly command a price edge over their rivals abroad, despite rising costs of raw materials, labor, and utilities, which help to fuel remarkable export growths.

Integrated Supply Chain

Another factor motivating fast auto-parts export in China is the gradual establishment of a fully integrated auto-industry supply chain in the country, being realized by the development of the six major auto-parts production bases, which has also attracted more foreign investments to facilitate further expansion of auto-parts export.