China's East Coast Becomes Top Automotive Industry Center

Most of the auto-parts zones and clusters

China replaced the United States as the world's largest automobile market in 2009, with total sales of about 13.6 million new cars—the culmination of years of high-speed growth, even during the global recession.

With the rapid increase in new-car sales, more and more Chinese provincial and municipal governments are pinpointing auto parts as a key industry for boosting economic development. An increasing number of assembled-vehicle manufacturers there are also devoting more attention to the development and production of auto parts.

In general, most of China's key auto-parts manufacturing zones and clusters are located in coastal areas, especially in Jiangsu, Hebei, Zhejiang, and Fujian provinces. In Jiangsu, for example, there are now a total of 13 major auto-parts production zones, the largest number of any province in China. Only five provinces are virtually without such zones or clusters: Gansu, Qinghai, Ningxia, Xinjiang, and Tibet.

Most of the auto-parts zones and clusters, which are filled mainly with small and medium-sized companies, have been developed by assembled-vehicle makers, who need the nearby direct parts supply and cost advantage that such clusters can achieve.

Some auto-parts zones have developed into bases of supply for specific product categories. Among these is the Tiexi Industry Zone in Liaoning Province, which is filled with tire makers, and an industrial park in Bengbu of Anhui Province, which has a cluster of filter-making enterprises.

Jiangsu Province

With an automobile production volume of about 1.5 million units and automobile sales revenues of 280 billion renminbi (RMB, or Chinese yuan) per year, Jiangsu Province is a major production base for assembled vehicles and auto parts and accessories.

The China Auto Parts (Suzhou) Industry Base in Kaijian, located in Xiangcheng, Jiangsu Province, is a joint venture project invested by the Xiangchen district government and China Auto Parts and Accessories Corp. (CAPAC), a leading auto-parts conglomerate that focuses on manufacturing, the supply of parts to automakers, and serving as an agent for imported auto parts and an outsourcing partner for numerous international parts brands. The conglomerate has more than 100 subsidiaries spread throughout various provinces such as Guangdong, Zhejiang, Jiangsu, and Shandong.

The China Auto Parts (Suzhou) Industry Base covers a 2,000-acre campus. Three testing/inspection and R&D platforms have been set up in the huge base to serve as a catalyst for the development of three industrial clusters: automotive electronics, automotive transmissions and parts, and interior parts and accessories.

The base is designed for the continuous development of newer and better high-tech automotive parts through the allocation of available resources to targeted sectors and the realization of vertical and horizontal integration. The base is eventually expected to generate an annual production value of more than 10 billion RMB, making it a national-level automotive-parts testing, design, R&D, and manufacturing center.

There are already 31 major auto parts companies and research institutions operating in Xiangcheng district. They cover a very wide range of auto-parts products such as instrument panels, bumpers, speakers, exhaust systems, brake discs, filters, electrical parts, and rubber tires, among others. Rough estimates put the annual capacity of parts makers in the district at two million instrument panels, two million front/rear bumpers, 15 million speakers, 500,000 exhaust pipes, and millions of electrical parts.

One of the companies operating in the district is the Sonavox Electronics Suzhou Industrial Park Co., which has a strong development capability and turns out about 12 million speakers a year, making it one of the leading players of its kind in China.

Zhejiang Province

About a million new cars are expected to be produced in Zhejiang Province this year, and new-car sales revenue in the province will amount to around 80 billion RMB.

Auto-parts makers along the Yongtaiwen Railway have formed a variety of industrial clusters with relatively mature supply chains for hundreds of automotive electronic, chassis, and brake system parts. Yuhuan, in Taizhou, is considered a major export base for Chinese-made auto-parts, and Ruian has been given the sobriquet of "City of Auto and Motorcycle Parts.”

Anhui Province

Luan is a major industrial citadel in eastern China's coastal province of Anhui, and it has listed the automotive industry as a key industry for priority development in its latest industrial development plan. An estimated five billion RMB will be poured into this line by 2011, which is expected to create an annual production value of 10 billion RMB next year. By 2015 a total 30 billion RMB will have been invested in Luan's automotive industry, generating expected revenues of 50 billion RMB that year.

The city is actively working for the formation of auto-parts industrial clusters within five years, in the hope that these clusters will become leading supply bases for key product items or special-purpose vehicles. The city's short-term goal is to be a provincial or even regional production base for higher-level auto parts and special vehicles.

Over next 10 years Luan aims to develop a relatively comprehensive auto-parts supply chain that encompasses more product categories by achieving a more reasonable division of labor between different players and closer partnerships between up- and downstream producers. The city's goals are clear and ambitious: to become one of the most important auto-parts production bases in China, to become a major supply base for both domestic and foreign markets, to form close supply partnerships with global automakers (including Chinese carmakers), and to create an increasing number of major enterprises with internationally known brands, logos, or specific product items.

Industry sources say that the future development of the automotive industry in Luan will be based on the guidelines in China's national automotive-industry promotion plan and corresponding projects mapped out by the Anhui Provincial Government with the aim of building on the province's existing industrial foundation and the advantage of market proximity to develop into a first-class auto-parts hub.

Fujian Province

Fujian is a major automotive production base, with seven assembled-car makers, six low-speed cargo-vehicle makers, 18 special-use vehicle manufacturers, and more than 400 auto-parts suppliers employing a total of about 68,4000 workers in 2008. The carmakers alone assembled 110,000 vehicles worth 40.3 billion RMB that year.

One of the foremost carmakers in Fujian is the South East (Fujian) Motor Co. (SEM), which has an annual production capacity of 150,000 cars. Currently, SEM turns out eight models under three brands: South East, Mitsubishi, and Chrysler. Another major player is the Xiamen KLM Motor Group Co., which has subsidiaries (Xiamen King Long United Automotive Industry Co., Xiamen Golden Dragon Van Co., and Xiamen Golden Dragon Bus Co.) that have helped make the company a leading supplier of medium- to large-size buses in China.

King Long (the biggest exported of buses in China), Golden Dragon, and other parts suppliers in Fujian have together formed an industrial cluster for the production of assembled heavy-duty, medium-duty, and light buses and commercial vehicles as well as almost all key systems and parts including vehicle frames, axles, bodies, engines, wheel hubs, pistons/piston rings, crankshafts, air conditioners, seating products, and interior parts/accessories.

Some companies in Fujian have been busy developing the production of special-purpose vehicles; the Longma Special Vehicle Making Co., for example, is the largest developer and maker of road sweeper and washer trucks in China.

Even during the global recession of 2008 and 2009, vehicle makers in Fujian have been aggressively developing newer and better models and exploring new markets in China and overseas so as to grasp the opportunities presented by the recovering market.

In September 2009, the Yuchai Group of Guangxi Province, the largest diesel-engine developer and manufacturer in China, inaugurated a brand-new diesel-engine production base in Fujian with a planned annual capacity of 100,000 units. This is the group's first such facility outside Guangxi.

Fujian's overall automotive production value is expected to grow 20% next year, to 70 billion RMB. The province's annual automobile production volume will increase to a projected 400,000 units in 2011, making the automotive industry one of the top-three industries in the province.