China’s steadily maturing automotive electronics industry still has great potential for growth, according to Beijing-based CCID Consulting which operates throughout the country.
The firm said China’s automotive industry enjoyed strong growth last year as cars became the most important driving force for expansion. Full-year vehicle output reached almost 7.3m units, up almost 20% over 2005. That growing automotive industry continued to push forward the automotive electronics market.
In 2006, directly driven by the fast-expanding automotive industry, China’s automotive electronics market maintained growth as full-year automotive electronics sales revenues grew almost 40% to 86.8bn yuan.
In 2006, power and chassis control systems and safety systems respectively accounted for 28.5% and 29.2% of China’s automotive electronics market.
During the year, some technologies achieved penetration amongst domestic vehicles and market demand slowed. By comparison, chassis control system upgrading was much faster after basic penetration had been achieved and, in addition to simple ABS, more and more chassis safety and stability systems were used in new vehicles. Diversified, complex and intelligent chassis systems have become the main trend in product evolution.
This trend was notably obvious in China’s automotive electronics market in 2006, CCID said. For example, ABS+EBD configuration achieved a penetration of over 80% in domestic cars while diversified chassis products including traction control, brake assist and vehicle stability systems, also started to be used in the domestics. Airbags also achieved a fitment rate of over 80% amongst Chinese-made cars in 2006.
On-board electronics continued to be a hotspot in China’s automotive electronics market last year, the firm said, with the market growing by almost 50%. On-board electronics accounted for 17.5% of China’s overall automotive electronics market, a rise over 2005.
Last year, sound systems accounted for the biggest percentage with product upgrades the key driving force. High-end on-board CD-based sound systems have quickly replaced card-based systems, particularly in cars.
Pre-installed GPS was also on the rise, particularly at the high end and became one of the main driving forces for the growth of the on-board electronics market in 2006.
To meet the needs of domestic parts production, all major automotive electronics firms have invested in China.
After several years of fast growth, the country’s automotive electronics industry has attained “a considerable size”, according to CCID and maintained growth momentum last year, up 40% to 80bn yuan. Foreign firms moving capacity to China and the rapid rise of local automotive electronics firms were the two most direct driving forces for the fast growth of China’s automotive electronics industry.
Indigenous automotive electronics firms are also now active in almost all automotive electronics sectors, developing most strongly in on-board electronics, while sound systems and on-board GPS products are also showing growth.
On-board electronics accounted for over 40% of China’s automotive electronics industry output in 2006.
Driven by foreign vendors’ production capacity shifts and local vendors’ fast growth, China’s automotive sound system output topped 11m units (not including semi-finished products such as sound system cores). On-board GPS (not including mobile phones) output exceeded 5m sets.
CCID believes the Chinese automotive electronics industry will continue to maintain fast growth momentum because, as in the entire electronic product manufacturing industry, the shift of global production capacity to the country and the growth of the local industry has made the China a true “global electronic product factory.”
However, the consultancy cautioned that, compared with the consumer electronics sector, automotive electronics is still in its early stages.
However, CCID believes that the technology will continue to mature and monopolies will eventually be broken because, since the automotive electronics market has been growing so fast, numerous other firms have also begun to focus on the automotive electronics field.
As more companies enter the automotive electronics product field and product performance improves, competition in the market will intensify and monopolies on certain products will eventually be broken.
Ongoing huge domestic demand provides powerful support for industry growth and China’s continuously expanding automotive electronics market itself is a driving force for the automotive electronics industry, CCID said, particularly because local automakers have grown quickly in the last few years. This has brought new opportunities to many indigenous automotive electronics companies.
In addition, numerous international manufacturers and automotive electronics specialists have also started to deal with indigenous vendors and the growth of indigenous automakers has exerted price pressures on other foreign brand automakers and automotive electronics suppliers.
This has increased pressure for them to produce their parts in China and also implies that in the next few years, foreign automotive electronics firms will continue to shift production capacity to China, CCID said.
It added that, the more mature a technology is, the fiercer the market competition, and China will have more (though unspecified) advantages in electronic product manufacturing and processing.
Taking automotive sound systems as an example, CCID noted that almost all globally well-known auto sound system makers have set up factories in China while traditional home appliance firms there have also entered the automotive electronics field, beginning with sound systems. China is gradually becoming a global on-board sound system production base, CCID said.
CCID analyst Li Shuchong thinks that in the next few years, China’s advantages in automotive electronic product manufacturing will be put into further play. As technology continues to mature, such advantages will gradually expand from on-board electronics to vehicle body electronics and even the power and chassis control field, he said.