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In 2003, China's automotive market surpassed Germany to become the world's third-largest, with a growing emphasis on after-sales service logistics and spare parts supply. In developed regions like Europe and the United States, the automotive after-sales sector has long been a lucrative industry, evolving into a well-structured and profitable segment. The profit from post-sale services often exceeds that of vehicle sales by a ratio of 3:1 to 7:1, highlighting its significance.
The U.S. auto aftermarket includes spare parts and repair services, involving manufacturers, sellers, and repair shops. The industry is highly competitive, with a wide range of options for consumers. Whether you choose an authorized dealer, a local shop, or even DIY at a specialty store, there’s flexibility in how you maintain your vehicle. Many parts are imported from Asia, including China, which plays a significant role in the global supply chain.
According to data, China's auto parts industry generated 300 billion yuan in revenue in 2003, making up about one-third of the total auto industry sales. Exports of vehicles and components reached $4.71 billion, showing a 34.4% increase year-on-year. By early 2004, auto parts exports had already reached $870 million, reflecting strong growth. Industry projections suggested that auto parts exports could account for over 40% of total sales by 2010.
However, the after-sales service industry in China still faces challenges. While car manufacturing has grown rapidly, the supporting service market remains underdeveloped. There are around 100 vehicle manufacturers and nearly 3,000 parts suppliers, but most are small and fragmented. Large automakers often rely on vertically integrated supply chains, leading to inefficiencies and limited competition.
The market is plagued by poor-quality products, low technical expertise among service personnel, and scattered operations. Management systems are lacking, and many manufacturers prioritize short-term gains over long-term development. This has led to price wars and reduced profits for parts suppliers. Additionally, the existing supply chain model, centered on vehicle manufacturers, limits the autonomy and motivation of parts companies.
Logistics issues further complicate the situation. Spare parts suppliers must maintain high inventory levels to meet unpredictable demand, increasing financial pressure. Information gaps between suppliers and manufacturers also hinder efficient production planning, causing delays and misalignment with market needs.
Technological limitations also pose a challenge. China lacks independent automotive technology, and most vehicles are assembled rather than designed domestically. This hinders innovation and reduces competitiveness. Foreign manufacturers often withhold critical design information, restricting Chinese companies' ability to produce certain components independently.
Moreover, malicious competition among parts suppliers leads to substandard products and price undercutting, creating a chaotic market environment. It is expected that within two to three years, the industry will see a wave of mergers and acquisitions, with smaller players being absorbed.
Globally, major automakers have shifted toward outsourcing logistics and building more efficient supply chains. Companies like General Motors work with third-party logistics providers, such as CNF Transport, to manage global distribution. This approach improves efficiency and allows focus on core business areas.
In contrast, China's current logistics model relies heavily on self-operated systems, where manufacturers handle all aspects of supply, production, and distribution. While this provides control, it also increases costs and limits scalability. As e-commerce and globalization expand, the need for more flexible, automated, and information-driven logistics becomes essential.
Ultimately, the future of China's auto parts industry depends on improving quality, investing in technology, and restructuring supply chains to enhance efficiency and competitiveness.