Demand in China to grow 18.3% yearly through 2011

The aftermarket for light vehicle compo¬nents and parts in China is projected to increase at an annual rate of 18.3 percent to ¥83 billion in 2011. Growth in the aftermarket will be driven by the large numbers of new and increasingly sophisticated light vehicles entering the park. These vehicles will provide greater aftermarket parts sales opportunities not only due to their sheer numbers but also to the ongoing introduction of new elec-tronic products and emission control technologies into the typical light vehicle.

As China’s light vehicle market matures into a true consumer market, the industry is seeing the development of strong retail brands, efficient distribution and service channels, and sophisticated marketing approaches. Moreover, the rising number of vehicles on the road in urban areas is straining the existing network of auto service providers, creating opportunities for new participants to enter the market. As is the case in most non-US automotive aftermarkets, light vehicle makers are playing major roles in structuring China’s nascent parts and service aftermarket, providing increased dealer coverage and introducing the latest customer service concepts. After price, the availability of quality service is the greatest concern of potential car buyers in China.

Electronics to lead gains

While mechanical products will remain the largest light vehicle aftermarket segment, electronic products -- which include autosound, electronic controls and modules, security systems and navigation products -- will see the fastest growth through 2011. Electronic controls and modules and autosound systems will be the primary drivers of demand. The ongoing rise in electronics content of the typical light vehicle in combination with the expanding automotive fleet will support a strong aftermarket going forward, as will consumer demand for an increasing variety of functional and entertainment options, which typically feature high electronics content. Re¬placement rates for mechanical, electri¬cal, exterior and structural parts will also experience strong growth going forward.

Small DIY segment to post strong growth

Professional service providers will remain the dominant aftermarket segment throughout the forecast period, with service providers aligned with light vehicle producers capturing a greater share of the market. However, the do-it-yourself (DIY) segment of the aftermar¬ket will grow strongly as China estab¬lishes a true used vehicle market.

Light vehicle segment to outpace low-speed vehicle market

Most light vehicle demand occurs in large cities near China’s coast, where incomes are higher. Lower income rural areas have created strong demand for low-cost “low-speed vehicles” suitable for conveying passengers and cargo over short distances. This industry has been largely separate from the light vehicle industry, both in terms of new vehicles and aftermarket parts and service. How-ever, increasing costs due to licensing, insurance and other charges recently imposed on low-speed vehicles are expected to result in more low-speed vehicle owners abandoning them for light trucks. Hence, demand for aftermarket parts in the low-speed vehicle market is expected to increase more slowly than in the light vehicle market.