Introduction to the Chinese Automotive HVAC Aftermarket

Published: 7 Aug 2006

By Angielina Tay

Introduction

China, one of the fastest growing economies in the world, achieved a per capita GDP of $6,800 in 2005. During the 10th Five-Year Plan (2001-2005), China’s automotive industry underwent rapid growth, which catapulted it to the status of the world’s second-largest automotive producer today.

This industry has been through many ups and downs in the past 50 to 60 years. The history of the Chinese automotive industry can be traced to the 1950s, when the government founded the First Automotive Factory (now the China FAW Group Corporation, China’s largest automotive company) to manufacture the first “Made-in-China” automobile. In the 1980s, the government began approval of foreign investments in the form of joint venture relationships with local companies. Beijing Jeep, formed in 1979, was the first joint venture, followed by Shanghai Volkswagen in 1983.

For China, 2006 is expected to be a challenging year, as it is the deadline for it to open its market to foreign competition, as laid down by the World Trade Organization (WTO) entry agreement. With automotive import quotas coming to an end in 2005, and the final phase of import car tariffs reducing to as low as 25 percent during mid-2006, competition among local car manufacturers and import car dealers is expected to be fierce. Additionally, adjustment in the automotive components tariffs to as low as 10 percent will have an impact on local parts manufacturers, especially affecting industries that do not require high technical skills. However, this may not reshuffle the Chinese automotive industry, because local manufacturers are able to accommodate the needs of their customers with lower prices, hence decreasing demand for imported cars and parts.

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