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The Automotive Spare Parts Industry in the Greater Bay Area

The automotive spare parts industry in the Greater Bay Area (GBA) is a significant sector, with growing demand and productivity for high-quality spare parts that meet international standards. According to studies of the prospective research institute, preliminary statistics for 2022 automotive parts manufacturing industry turnover of 3.88 trillion yuan in PRC, an increase of 3.63%. The industry is known for its innovative and technologically advanced products, which are exported to markets around the world. Inspired by technological innovation and market potential, Guangdong aims to exceed RMB 590 billion in automobile parts manufacturing revenue by 2025.

This article addresses the automotive spare parts industry in the Greater Bay Area (GBA), highlighting the opportunities and challenges for overseas investors.

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The GBA, which includes the cities of Hong Kong, Macau, and nine cities in Guangdong Province, is home to a large number of automobile manufacturers and suppliers, including some of the world’s leading brands such as Volkswagen (VW), BYD, Toyota, and Honda. Several cases show that when globalized automobile manufacturers move to increase production capacity at its plant in the GBA cities, it often had a knock-on effect of encouraging a swarm of part suppliers to set up manufacturing facilities near its factory.

In GBA, there is a robust supply chain network encompassing automotive spare part manufacturers, distributors, and retailers. Moreover, the industry benefits from advanced logistics infrastructure, such as highly efficient transportation and distribution systems, along with state-of-the-art storage facilities.

Furthermore, the GBA’s automotive spare parts industry is collaborating with government agencies, industry associations, and other stakeholders to develop policies and initiatives that support the transition to a more sustainable transportation system. For example, the industry is working with the government to promote the use of public transportation and electric vehicles, as well as to develop infrastructure for EV charging and other sustainable transportation options.

Automotive Decarbonization Approaches

The adoption of electric vehicles (EVs) is rapidly becoming essential in car technology as a response to escalating environmental damage and the pressing demand for alternatives to traditional internal combustion engine (ICE) vehicles. In recent years, China has seen a significant increase in the demand for energy vehicles (EV) spare parts, driven by the nation’s commitment to reducing carbon emissions.

With its groundbreaking advancements in electric vehicle (EV) technology, the GBA has become a leading global inspiration for other regions seeking to progress in this field. EV technology in the GBA has undergone remarkable advancements since the early 21st century, due to China’s macroeconomic policy on bolstering the economy of the GBA through aggressive advancement of EV technology. As a result, the industry has been investing heavily in research and development to produce high-quality EV spare parts that meet the specific requirements of EV manufacturers in China and other countries. This has led to the development of a range of innovative products, including EV batteries, motors, and charging systems.

In addition to the development of EV spare parts, the industry is also working to develop more sustainable manufacturing processes and reduce its overall carbon footprint. This includes the implementation of energy-efficient manufacturing processes, the use of renewable energy sources, and the adoption of sustainable transportation and logistics practices.

Opportunities for Overseas Investors in the Greater Bay Area

According to INVEST GUANGZHOU, Guangzhou ranked first among large and medium-sized cities in China in terms of automobile output for the fourth consecutive year in 2022. In addition, for foreign investors, data show that foreign investment used in Guangzhou’s manufacturing industry increased by 78.5% from January to November 2022, and that of the high-tech manufacturing industry doubled. In this context, Guangzhou puts in greater efforts to provide whole-process services support for foreign investment.

Meanwhile, in Foshan, besides the mature auto industrial parks such as FAW-VW Industrial Park, more industrial parks such as the Foshan Automotive Parts Industrial Headquarters Base is under construction. It has a total investment of over 1 billion yuan, covers an area of about 14000 square meters, and has a total construction area of over 100,000 square meters. It will be built as the first office carrier for automotive parts-selling enterprises in the GBA, and will be the operating headquarters of the enterprises of large automotive parts market and the platform for the gathering of automotive parts-selling enterprises of world-famous brands.

There are many small and medium-sized enterprises (SMEs) in the automotive spare parts industry in the GBA that have achieved significant success. This is especially so when electrification is changing car-making. Whilst the old brands have relied on the complexity and cost of Internal Combustion Engines (ICE) to create huge barriers to entry, the relative simplicity of batteries and electric motors knocks these barriers down. Here are some examples:

  • MAGNETEC: it is a strongly development-driven, internationally active German-based company in the field of inductive components for the innovative sectors of automotive. They found MAGNETEC Materials China in Guangzhou city of the GBA in 2021.
  • ZF: it is a German-based company that registered sales of EUR 7 billion in China in 2021. Buoyed by the favourable policies, many industry leaders, including ZF Group, have increased investment and scaled up production capacity in Guangzhou. Following ZF Guangzhou Technical Center, ZF Group decided to build the automotive electronics plant in Huadu District, Guangzhou in 2022. lt is planned to start construction in 2023 and reach mass production in 2025.
  • Bühler Motor Group: it is a German-based global company that focuses on the development, manufacturing and marketing of sophisticated electro-motor and mechatronic drive solutions and is one ofthe top 3 suppliersin their markets. Their subsidiary with a factory in Zhuhai city of the GBA is certificated as an HNTE (high and new technology enterprise), a specialized and sophisticated SME that produces new and unique products, as well as an innovative SME. They also have a subsidiary in Hong Kong SAR.
Challenges for Overseas Investors in the Automotive Spare Parts Industry

While SMEs in the automotive spare parts industry in the GBA have achieved significant success, they also face several challenges. Some of the key challenges faced by these SMEs include: Rapidly changing technology; Competition from larger players; Lack of access to funding; Compliance with regulations; and Supply chain disruptions.

To cope with supply chain disruptions, SMEs in the automotive spare parts industry in the GBA are taking a proactive approach to managing supply chain disruptions, through diversification of suppliers, stockpiling of inventory, development of backup plans, use of technology, and collaboration with suppliers. These strategies can help SMEs to mitigate the impact of any disruptions and to continue to meet customer demand.

Overall, the automotive spare parts industry in the GBA is a dynamic and growing sector that plays a critical role in supporting the region’s automobile industry. With its focus on innovation and quality, the industry is well-positioned to continue to grow and develop in the years ahead.