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In 2003, China's automotive market surpassed Germany to become the third-largest in the world. As the industry expanded, so did the demand for after-sales service logistics and spare parts supply. In developed regions like Europe and the United States, the automotive after-sales service sector has long been a lucrative market, with standardized operations and significant profit margins. For many years, this industry has grown into a major economic force, where the value of post-sale services often exceeds that of vehicle sales by a ratio of 3:1 to 7:1.
The automotive aftermarket refers to the spare parts and services used for vehicle maintenance and repair after purchase. It involves three main categories: auto parts manufacturers, distributors, and repair services. In the U.S., the repair industry is highly developed, with a wide range of options available. Customers can choose from original equipment dealers, independent shops, or even DIY stores, depending on their budget and needs. Many components are imported from Asia, including a large portion made in China. This diversity ensures high quality, efficiency, and customer satisfaction.
According to statistics, in 2003, the revenue of China’s auto parts industry reached 300 billion yuan, accounting for about one-third of the total auto industry sales. The total exports of automobiles and parts amounted to $4.71 billion, reflecting a year-on-year increase of 34.4%. By January-February 2004, auto parts exports had already reached $870 million, showing a growth of 39.9% compared to the previous year. Industry forecasts suggested that by 2010, auto parts exports could account for over 40% of total sales.
Despite this growth, the after-sales service industry in China still faces challenges. While the manufacturing sector has seen rapid development, the supporting after-sales market has lagged behind. There are around 100 vehicle manufacturers and nearly 3,000 parts suppliers, but most are small and fragmented. Large automakers typically have extensive vertical supply chains, which can lead to inefficiencies and poor coordination.
The auto parts market in China is plagued by low-quality products, unskilled labor, and weak management systems. Many repair shops operate independently, making it difficult to maintain consistent service quality. Additionally, car manufacturers often prioritize short-term profits over long-term sustainability, leading to neglect of after-sales services. This has put pressure on parts suppliers, who struggle to maintain profitability while meeting the demands of large automakers.
The existing supply chain model, centered around vehicle manufacturers, limits the autonomy of parts suppliers. Suppliers must set up warehouses near production plants, increasing their inventory costs and reducing overall efficiency. With poor information flow and limited communication between supply and demand, the entire system becomes less responsive and more inefficient.
Furthermore, the lack of technological innovation hinders the growth of China’s auto parts industry. Most vehicles are assembled rather than designed domestically, resulting in limited technical expertise among local manufacturers. As a result, Chinese companies often rely on foreign designs and face restrictions on producing certain components due to patents or proprietary materials.
Malicious competition among parts manufacturers also creates instability. Some companies resort to selling substandard products or undercutting prices to survive, further damaging the industry’s reputation. Experts predict that within two to three years, the industry will experience a wave of mergers and acquisitions, with smaller firms being absorbed or eliminated.
Globally, leading automakers have shifted toward outsourcing logistics and building more efficient supply chains. Companies like General Motors partner with specialized logistics providers to manage global operations. In contrast, China’s current logistics model relies heavily on self-operated systems, where manufacturers control all aspects of the supply chain. While this offers greater control, it also increases financial burdens and limits flexibility in a rapidly evolving market.
As e-commerce and globalization continue to reshape the industry, Chinese automakers must adapt by improving logistics capabilities and embracing more collaborative models. The future of the auto parts industry depends on overcoming these challenges and building a more sustainable and competitive ecosystem.