China's Auto Accessory Industry Could Be As Big as Its New Car Market
2009/10/08 | By CENSOnly as recently as 1982 when the automotive accessory industry had just begun to gain momentum in China, the vast majority of the products turned out by Chinese makers were items with low added-value and technical-threshold, such as window tint films, seat covers etc., which fit the trend since the car market in China was nascent, and demand for locally-made auto accessories likely lacked sophistication. However just as rapidly the car market in China has changed, so has its auto accessory counterpart: only a decade later by 1993, one could see significantly broader product variety with higher technical content offered by Chinese makers for both domestic and export sales, including car alarms, CD players, leather seat covers, tear-proof window film etc. Currently, most of the decorative auto accessories made in China are for exports.
With about 9.3 million new cars having been licensed in China in 2008, industry experts say that most vehicles are bought by first-time owners who know only to pay more for interior accessories, or upgrade exterior styling and aerodynamic performance, due mainly to limited experience with cars. Note that the earliest Porsche sportster and Alfa Romeos were launched in the early 1960s, and that western auto buffs have been toying with cars, tweaking performance of all kinds, ever since. Insiders generally agree the auto-accessory market in China is in its infancy and will take time to mature.
Meanwhile the sheer size of the new car market in China, as well as its potential for further growth, inevitably has the prerequisites, at least in theory, to create an equally impressive aftermarket auto accessories industry and market. By early 2009, new car sales in China had exceeded even that in the USA, hitherto considered the global automobile kingdom. Any savvy auto accessory supply operator would be eyeing the market potential in China, especially those who are ambitious to tap the business opportunities to be generated once Chinese car owners become ever more sophisticated, hence developing appetites for greater varieties of auto accessories designed for cosmetic and performance upgrades.
Foreign Retailer
Living up to the Japanese reputation for being foresighted businessmen who believe in getting onboard early, Autobacs of Japan, the largest auto-accessory retail chain in Japan, set up the Autobacs (China) Auto Goods Commerce Co., Ltd. in Beijing in July 2005. The fully-Chinese-owned subsidiary now has 12 franchised sales points throughout China, carrying a large variety of auto accessories such as wheels, tires, lubricants, batteries, car stereos and many others. These retailers also provide on-the-spot installation services and technical support.
Not to be left behind by its major hometown rival, Yellowhat Co., Ltd., the second-largest auto-accessory retail chain in Japan, set up its first directly-operated sales point in Shanghai in 2005. So far, Yellowhat operates 13 outlets in China, each of which selling more than 10,000 accessories, including wheels, car stereos, GPS navigation devices, batteries, lubricants, tuning items, chemicals etc., as well as offering cosmetic treatments, basic repair and maintenance. Such one-stop-shopping is quite popular in China.
Makers of auto-accessories in China are mainly concentrated in Zhejiang and Guangdong provinces. In the former, makers cluster mainly in centers as Tiantai and Wenzhou to focus on producing interior accessories as small ornaments, seat covers, cushions etc. In Guangdong, makers are mainly in Shuende to produce exterior accessories as protective or bumper parts, exhaust pipes, steps etc. Most companies turn out products for both domestic and foreign markets.
Tiantai
With about 1,700 auto accessory companies in Tiantai County, this major manufacturing base in Zhejiang province employs about 50,000 people to turn out mainly seat covers, steering-wheel covers etc. The Tantou Industrial Area is one of the major auto accessory making citadels in Taizhou City within Tiantai County, home to 262 companies, 21 of which are relatively large and ship products globally to command a very high market share.
Mengzhou, a county-level city in Henan Province of China, is the world's capital for processing genuine sheepskin car seat covers, supplying about 60% to 70% of the global demand. The makers cluster mainly in Hebei Province, where upmarket products are made, and Henan Province, the source of popularly-priced items.
From about 1998, some companies in Mengzhou City began promoting own-brand sheepskin seat covers, setting an example for others to follow, which eventually led to the formation of an industry cluster in the region. Statistics show that in 2007 Mengzhou processed 25 million genuine sheepskins, generating production value of US$850 million, including US$138 million for exports. A sign of the importance of such industry is that sheepskin exports accounted for 79.5% of the city's total export value that year.
Lanxi, Flax Capital of China
Lanxi County of Heilongjiang Province is the birthplace and capital of the flax industry in China, with the county's economy relying on supplying flax auto seat covers.
The county, supplying a significant 30%-plus of the total in China, has formed a well-established supply chain for six flax-related product categories, of which auto seat cover is the largest that generates one-third of the county's gross domestic product (GDP).
In 2007, companies in Lanxi dominated the market in China, turning out 6.5 million sets of flax auto seat covers to supply more than 86% of the demand in the nation. The county is home to more than 340 companies, 50 to 60 being bigger players, and about 100,000 workers who make a variety of flax items.