Recent Downturn’s impact on China’s Auto Aftermarket

Let us take a snap shot about China’s automotive component parts market first:
* Fragmentation: up to now, we have 2300 component makers scattered in 31 provinces. Only 6 of them have the turnover about 1 Billion US$. 10 of them have 80% of the total market sales and the rest of 2300 share the other 20%. This fragmentation leads to a obvious weakness: cost disadvantage due to lack of economies of scale.
* Revenue streams: Until recently, most Chinese auto parts manufacturers focused exclusively on local OEMs and Export business. Why? Because the aftermarket was seen as too small and in China the sector is bedeviled by knock-off parts.

Due to the recent down turn, revenues from local OEMs and Export business are shrinking in an unprecedented speed. In a foreseeable future, the outlook is also not optimistic. We foresee the following changes to happen in next two years:

* Faster-than-expected industry consolidation due to the financial difficulties caused by this global downturn
* More suppliers will turn to the Aftermarket for new source of revenues due to
* Rapidly expanding car parc
* Strong sales of small cars, which have a higher demand for accessories
* The emergence of the used car market
* Improve quality and reliability of distribution channels

For more detailed and reliable information and analysis, please also refer to the KPMG official web sit www.kpmg.com