I. Overview of China's auto part industry

Together with the development of China's economy, relatively rapid growth has been maintained in China's auto part market in the recent years. Currently, there are about 5,000 large part enterprises in China, whereas 15% of these enterprises get a monthly profit of 50 million yuan. Part cost takes up over 70% of the total auto cost; therefore, the development of auto part industry directly influences the automotive industry development. Only continuously increase in auto part sales revenue certainly can a boom in China's automotive industry be ensured. Auto part, as a sub-branch of automobile industry, contributes a lot to the development of China's auto industry.

China's auto part manufacturers can be divided into the following four types: the first is part plants affiliated to large automotive groups. Depending on state-owned parent groups, these plants are accustomed to China's traditional plan production mode and deviates from market orientation in price mechanism. The second is state-owned part manufacturers, most of which are acquired due to long-term poor management. The third is private companies, most of which are developing quickly and shoulder the future of China's auto part industry to some extent. The fourth is small factories. Due to the old management system and low-level quality guarantee system, these factories can hardly exist, not to mention develop. Most likely they will be out of the market or be acquired in the near future.

After entry into WTO, China's automotive industry encounters quite a lot global impact. As foreign auto part manufacturers are attracted by the broad market in China and accelerate their steps into China's market. At present, foreign invested auto part enterprises have accounted over 500 inChina. A market share from transnational part manufacturers has exceeded 20%. Facing such fiercely completion, China's auto part industry is in urgent need of improving the backward situation of small scale and low concentricity.


II. Incentives for merger and reorganization

Profit shrinking is the fundamental reason. In the first quarter of 2005, profits of automotive industry decreased about 10 billion yuan year on year, down by 60%. Influenced by the stagnation of automotive assembly industry and the rising of steel price, it is the first time in the past ten years that the profit has declined. In the first half of 2005, many automotive assembly plants started to lower the price of part to 50% utmost. While the unit cost of compact sedans increases 1,000 yuan due to the gradually rising price of materials. In this situation the part manufacturers are under more pressure, heating up the competition between assembly plants and part manufacturers. However in the domestic market, a big majority of auto part manufacturers are suffering the double pressure of the rising price of materials from the market and the decreasing price of auto part from assembly plants therefore it is quite difficult to develop independently further. In contrast, such ``pressure`` has little impact on foreign-funded auto part manufacturers in China. Having patent and unique skill of their own, they are more freely to resist price risks from the market and even to expand their market scales and extend their distribution network. They win a lot in negotiations with Chinese local manufacturers and are more active than ever. Chinese local manufacturers took measures to diminish the pressure through adjusting and optimizing resource allocation, but seem in vain. In the long run, it is an inevitable trend for Chinese local manufacturers to merge and to reorganize.


Secondly, monopolization of foreign capital also threatens local auto part manufacturer. Foreign capital has obtained large market share in passenger-vehicle part market in China. Currently, foreign capital takes over 60% in China's auto part market. Foreign enterprises have sole markets of some auto parts, such as high-end electronic control, fuel injection system, transducer, brake system, steering system, etc. With an increase of total registrations, it is undoubted that the auto part industry will develop. While the best solution for Chinese local auto part manufacturer is to merge and reorganize.

Thirdly, the features of domestic auto part enterprise also decide their reorganization in the future. Along with the more intense market competition, problems caused by small scale, low concentricity and disorderly competition become more serious. Thereby, the government need support more, help R & D and accelerate the production of independent intellectual property right products; domestic manufacturers must integrate to complement each other and allocating resources rationally under the direction of market. Only in this way can they compete with foreign investors for a better market share.

1 Research overview
1.1 Background
1.2 Content
1.3 Method

2 Status quo of China's auto part industry
2.1 Overview Characteristics
2.2 Analysis of investment status in 2005
2.3 Analysis of supply and demand
2.3.1 Supply
2.3.2 Demand
2.3.2.1 Analysis of scale and demand features
2.3.2.2 Analysis of demand trend
2.4 Analysis of foreign-invested auto part industry in China
2.4.1 Features and regional distribution
2.4.2 Analysis of main modes
2.4.3 Strategic analysis of its development in China

3 Market segmentation overview of China's auto part industry
3.1 Analysis of automotive engine industry
3.1.1Market overview and characteristics
3.1.2 Analysis of market position and market development
3.2 Analysis of automotive electronics industry
3.2.1 Market overview and characteristics
3.2.2 Analysis of market position and market development
3.3 Analysis of automotive bearing industry
3.3.1 Market overview and characteristics
3.3.2 Analysis of market position and market development
3.4 Analysis of automotive tire industry
3.4.1 Market overview and characteristics
3.4.2 Analysis of market position and market development
3.5 Analysis of automotive glass industry
3.5.1 Market overview and characteristics
3.5.2 Analysis of market position and market development
3.6 Analysis of automotive maintenance and repair market
3.6.1 Market overview and characteristics
3.6.2 Analysis of market position and market development strategies

4 Analysis of policies for investment in China's auto part industry
4.1 Effects of micro-economic policies
4.2 Trade policies
4.3 Environmental policies

5 Background of merger and reorganization in China's auto part industry
5.1 Background analysis of merger and reorganization
5.1.1 Low industrial concentricity
5.1.2 Large amounts of foreign capitals surging into China
5.1.3 Internal management problems
5.1.4 Raw material cost increasing
5.2 Merger and reorganization characteristics
5.2.1 Other enterprises march into automotive industry through merger
5.2.2 More private enterprises rapidly join in
5.2.3 Foreign capitals surge into China
5.3 Barriers for merger and reorganization
5.3.1 Policy barriers
5.3.1.1 New industrial policies
5.3.1.2 Technical requirements by environmental policies
5.3.1.3 Requirements by ``Eleventh Five-year Plan``
5.3.2 Capital barriers
5.3.2.1 Limits on automotive finance
5.3.2.2 Financing in listed auto assembly company

6 Cases of merger and reorganization by foreign manufacturers
6.1 Visteon, SAIC and Yanfeng Visteon merged Jiangsu Tianbao Technology Inc.
6.1.1 Background
6.1.2 Process
6.1.3 Conclusion
6.2 Visteon and Yanfeng Visteon purchased Shaoxing Yidong Automotive Instrumentation Limited
6.2.1 Background and motives
6.2.2 Process
6.2.3 Conclusion
6.3 Bosch merged Wuxi Weifu Group Limited
6.3.1 Background and motives
6.3.2 Process
6.3.3 Conclusion
6.4Bosch purchased starter motor division and dynamo division of China Automotive Changdian Inc.
6.4.1 Background and motives
6.4.2 Process
6.4.3Conclusion
6.5 Pirelli and Shandong Lutong Tyre Limited founded a joint venture
6.5.1Background and motives
6.5.2 Process
6.5.3Conclusion

7 Analysis of investment from foreign auto part manufacturers
7.2Bosch
7.1.1 Investment in China
7.1.2 Competitive advantages
7.2 TRW
7.2.1 Investment in China
7.2.2 Competitive advantages
7.3 DENSO
7.3.1 Investment in China
7.3.2 Analysis of core competitive advantages
7.4 Valeo
7.4.1 Investment in China
7.4.2 Competitive advantages
7.5 Siemens
7.5.1 Investment in China
7.5.2 Competitive advantages
7.6 MICHELIN
7.6.1 Investment in China
7.6.2 Competitive advantages

8 Case analysis of merger and reorganization by manufacturers
8.1 Legend Holdings purchased Jinan Automobile Fittings Plant
8.2 Huaxiang Group purchased Jiangxi Fuqi Automotive Plant
8.3 Weichai Power purchased 28.12% shares of Torch Automobile Group Limited,
8.4 BAO STEEL purchased transmission plant and change valve plant of COURT
8.5 Zhejiang Wanxiang System Co., Ltd purchased 51% shares of Henan Automotive Braker Limited
8.6 Wanxiang Group purchased 21% shares of UAI
8.7 Wanxiang Group purchased Hubei Tongda Inc.
8.8 Wanxiang Group purchased 60% shares of PS
8.9 Hangsheng Electronics purchased Jilin Hongyu Electric Limited and founded a joint venture with Hyundai AUTONET
8.10 Changchun Faw-Sihuan Automobile purchased 50% shares of Johnson Controls, Inc.

9 Competitiveness analyses of domestic merger and reorganization
9.1 Wanxiang Group
9.1.1Product structure
9.1.2 Supply chain & logistics capacity
9.1.3 Marketing network
9.1.4 Major clients
9.2 Fuyao Group
9.2.1 Product structure
9.2.2 Supply chain & logistics capacity
9.2.3 Marketing network
9.2.4 Major clients
9.3 Fawer Automotive part Co., Ltd
9.3.1 Product structure
9.3.2 Supply chain & logistics capacity
9.3.3 Marketing network
9.3.4 Major clients
9.4 Changchun Faw-Sihuan Automobile Co.,Ltd
9.4.1 Product structure
9.4.2 Supply chain & logistics capacity
9.4.3 Marketing network
9.4.4 Major clients
9.5 Wuxi Weifu Group Co.,Ltd
9.5.1 Product structure
9.5.2 Supply chain & logistics capacity
9.5.3 Marketing network
9.5.4 Major clients
9.6 Torch Automobile Group Co.,Ltd
9.6.1 Product structure
9.6.2 Supply chain & logistics capacity
9.6.3 Marketing network
9.6.4 Major clients
9.7 Weichai Power
9.7.1 Product structure
9.7.2 Supply chain & logistics capacity
9.7.3 Marketing network
9.7.4 Major clients

10 Opportunity analyses of merger and reorganization in local auto part industry
10.1 Hebei Lingyun Industrial Group Co.,Ltd
10.2. Dicastal Wheel Manufacturing Co.,Ltd
10.3 Wanfeng Auto Holding Group
10.4Jiangxi Changli Automobile Spring Co.,Ltd
10.5 Qingte Group
10.6 Liuzhou Wuling Motors Co.,Ltd
10.7 Hualing Precision Machinery Co.,Ltd
10.8 SG Automotive Group
10.9 United Automotive Electronic Systems Co.,Ltd
10.10 Chongqing Zongshen Motorcycle Group
10.11 Chongqing Dajiang Industrial (Group) Co.,Ltd
10.12 Hubei QiXing Auto Body Co.,Ltd

11. Suggestions