Bird-eye View of China’s Aftermarket in Coming Years

Enough has been said about the individual car model trends in the next 2-5 years. Now let us take a bird-eye view of China’s aftermarket to see what opportunities and challenges are there for us.

China’s aftermarket Demand for light vehicle parts is projected to increase at an annual rate of 13.8 percent, reaching to around 4.9 billion US dollar in 2009. We expect dramatic levels of growth in the coming years, driven by the extremely high growth rate of light vehicle sales since 2005. The expanding car-parc, coupled with private ownership of new vehicles at more than 70 percent today, supports strong growth in the parts and service market.

To be more specific, with more modernized vehicles joining the market, China’s rapidly expanding light vehicle park is experiencing a structural change, providing additional aftermarket parts sales opportunities due to high vehicle content levels and the introduction of new emissions control technologies.

However, opportunities always come with challenges. Potential barriers to continued aftermarket parts revenue growth include China's lack of a functioning used car market with appropriate market-based pricing mechanisms, which hinders demand for replacement parts for used vehicle refurbishment. Furthermore, rampant aftermarket parts counterfeiting could limit growth in the legitimate parts aftermarket going forward, causing intense levels of price competition.

I attached some data to support my argument. For more trends and information, please also refer to http://www.jdpower.com/corporate/china. I found it very useful for updated information.


AUTOMOTIVE AFTERMARKET IN CHINA

(million Chinese yuan) %Annual Growth

Item 1999 2004 2009 04/99 09/04

China Auto Aftermarket 9100 21000 40000 18.2 13.8
Mechanical 4530 10440 19800 18.2 13.7
Electrical 1810 3980 7240 17.1 12.7
Electronic 1080 2810 6000 21.1 16.4
Exterior & Structural 1680 3770 6960 17.5 13.0