What do changes in China mean for the aftermarket?

Dec. 31, 2013

At the end of 2013, China’s government announced social reforms and changes to its financial sector that have the potential of reshaping the country’s competitive landscape.

Reforms to China’s financial system are expected to increase the country’s consuming class, potentially doubling it to 600 million people by 2020, according to Bloomberg. International corporations ranging from General Motors to Mondelez International Inc. (Oreo cookies and Ritz crackers) to Yum! Brands Inc. (KFC and Pizza Hut chains) are boosting their investments in China to reach this growing consumer market.

China’s economic reform may include establishing market-determined prices for resources, boosting private-sector and foreign investment, and encouraging urbanization. The government has pledged to implement these measures by 2020 – all of which could make it a high-income country.

Much attention has been paid to China’s proposed easing of its “one child” policy. This will increase long-term demand for a wide range of consumer products – including automotive products.

The one-child reform has the potential to drastically change China’s demographics. According to Bloomberg data, 17.1 percent of China’s 1.36 billion population are aged below 15, compared with India’s 28.5 percent, Brazil’s 25.4 percent and Russia’s 15.9 percent. A study by the China Academy of Social Sciences suggests that the policy change should add about 1 million babies by 2015.

What does this mean for the global automotive aftermarket? EY forecasted that the Chinese autoparc is expected grow to nearly 225 million vehicles within the next 10 years. A Chinese baby boom translates into more parents shopping for cars. According to Citigroup Inc.’s research in China, parents with two children are much more likely to buy a car than parents with one child.

GM has committed to spend $11 billion in China by 2016 on new plants, products and people. The carmaker reported sales of 2.84 million vehicles through joint ventures last year and has set a goal of selling 5 million vehicles by 2015.

More vehicles on the Chinese roads mean more vehicle maintenance. The country’s developing independent aftermarket needs to be prepared to meet the challenge of keeping the growing vehicle population on the road.

AASA and its event partners addressed this need at the annual Automotive Aftermarket Summit during Automechanika Shanghai 2013, focused on “Employee Training & Service Innovation.” The free event, open to manufacturers and distributors, included discussions of “Personnel Development of Automotive Industry Aftermarket,” “Exploring the Online to Offline Service Model,” and “Transformation and Upgrading of Auto Parts Distribution Companies.”

AASA and its parent association, the Motor & Equipment Manufacturers Association (MEMA), are in the planning and development process for new programs and initiatives in China and other growing international markets in 2014. Watch this column for more details!

The AASA China Aftermarket Forum (CAF) is a consortium of full-service suppliers that meet on a quarterly basis to discuss opportunities within the Chinese aftermarket and to identify ways to address challenges in the growing segment. For more details about CAF programs and initiatives, click here.

The AASA Overseas Automotive Council (OAC) promotes the sale in foreign markets of automotive and heavy-duty products manufactured in North America. Those products include components, accessories, chemicals, hand and power tools, service maintenance and repair equipment, and paint and body supplies for both cars and trucks. OAC has more than 350 members in more than 40 countries. More information is available through its website, www.oac-intl.org.

AASA exclusively serves manufacturers of aftermarket components, tools and equipment, and related products. It is a recognized industry change agent – promoting a collaborative industry environment, providing a forum to address issues and serving as a valued resource for members.

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About the Author

Curtis Draper is the vice president of industry analysis, programs and member services at the Automotive Aftermarket Suppliers Association (AASA) and group executive of AASA’s international aftermarket councils: the China Aftermarket Forum (CAF) and the Overseas Automotive Council (OAC). CAF is a consortium of full-service suppliers that meet on a quarterly basis to discuss opportunities within the Chinese aftermarket and to identify ways to address challenges in the growing segment. OAC promotes the sale in foreign markets of automotive and heavy duty products manufactured in North America. Those products include components, accessories, chemicals, hand and power tools, service maintenance and repair equipment, and paint and body supplies for both cars and trucks. OAC has more than 350 members in more than 40 countries.