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April 14, 2016updated 09 Apr 2021 9:55am

China volume and CO2 targets driving content demand – Delphi

Delphi says significantly rising production in China and tougher emissions targets are driving major content opportunity.

Delphi says significantly rising production in China and tougher emissions targets are driving major content opportunity.

Despite a cooling economy, estimates are China will settle to between around 5% and 7% growth leading to a 31m annual vehicle market by 2020, with content increasingly coming from premium, SUV and electric segments.

“China is one vehicle per eight people, this is the penetration rate,” Delphi China president and managing director, Asia Pacific Connection Systems Simon Yang, told just-auto on the sidelines of the supplier’s Investor Event in London this week.

“Europe, according to the number we see, is one vehicle for 1.8 people. If China gets half of that, we are seeing at least 300m incremental [vehicles, although] our forecast is lower than that.”

The Delphi China chief added by 2020, China will produce nearly 20% of vehicles globally, while it has also set aggressive C02 targets, triggering supplier opportunity through more content per vehicle.

“For Delphi, this means more content per vehicle,” said Yang. “[There is] massive urbanisation taking place. In the next ten years, 350m people will move into China’s cities. This creates a huge customer base . Urbanisation is an over-riding priority of the government.

“There will be a huge growth in China’s middle class – [it means] more customers, more new car owners.

That urbanisation is visible in China’s Tier 2 and Tier 3 cities, which will see auto demand grow from 55% of current demand to 70% in 2020. Equally, with the growing wealth of Chinese customers, demand for premium is rising.

By 2020, it will be 30% of the total, while SUV and electric vehicle sales are also rising, with China now the largest new energy vehicle market globally.

“Delphi is supplying [the] top ten OEMs in China,” added Yang. “There are more than 70 local OEMs in China – we focus on the top ten. They promote high-end platforms which require content.”

The component producer nonetheless still works with local OEMs, with US$1bn of revenue forecast through this avenue in 2016, while the top ten will account for US$2.3bn.

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