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China's Automotive Clusters - Conquer China

In the past articles, I talked about how the Chinese automotive industry became what it is today and exposed some of the advantages and disadvantages of setting up an automotive business in China. In this article, I would like to introduce to you all of China’s main automotive clusters  along with a quick description of each. I hope this content will be a good source of “keywords” for all of you industrious automotive businessmen out there. Let’s dig right in, shall we?

In recent years more Chinese cities and regions are trying to capture the attention of foreign companies by offering various incentives and setting up advanced technology hubs. Thus, a growing number of foreign companies have invested outside of Beijing and Shanghai, the two established hubs of foreign R&D activities in China.

Chongqing Cluster

Sichuan is emerging as an important consumer market in China. In 2006, new registrations of civil vehicles reached 257,595 units, ranking the province seventh in China, while the possession of private vehicles amounted to nearly 1.28 million, also ranking seventh nationally. The possession of civil vehicles was 1.57 units, accounting for 4.2% of the national total.

According to city government statistics from 2006, Chongqing’s automobile industry (including vehicles and parts) realized a value of RMB 133.1 billion, an increase of 35.4% compared to the same period in the previous year and accounting for 31.7% of the city’s total GDP. During the same period, the sector produced 791,000 vehicles (including motorcycles), which amounts to an increase of 17.3% compared to the same period during the previous year. Sales volume during the period was 789,000 units – an increase of 14.9%. As a percentage of the total output of China’s auto industry, Chongqing’s output accounted for 11% which makes the city the fourth largest producer of automobiles in the country.

Beyond increasing production, the government has also put in place incentives which are encouraging producers to enhance their research and development of new technology, particularly in the areas of clean energy and energy efficient vehicles. The overall goal is to attain an industry that can rely 80% on domestically developed technology. In 2006 the city had 261 sized auto parts enterprises of which more than 200 enterprises obtained TS16949 Certification. The production volume of 28 types of automobile parts such as camshafts, transmission, bearings and brakes ranked among the top three across the country.

As one of China’s four provincial-level metropolises (along with Shanghai, Beijing, Tianjin) Chongqing covers an area of more than 82,300 square kilometres and is officially home to more than 28 million people. For the automotive sector, there are a number of areas around the city which have become home to important industry clusters: The Northern New District Industrial Zone integrates automobile production, research and development, trade and tourism functions; Jiulong Industrial Park and Shapingba District present a dominant number of auto part and component suppliers; Ba’Nan District and ChaYuan New Area are home to ChangAn Suzuki and have recently attracted a growing number of parts suppliers.

Changchun

The birthplace of FAW Group, the nation’s first State-owned automaker, Changchun is known as the cradle of China’s automotive industry. After decades of development, the Jilin provincial capital became the eighth city in the world to have a production capacity of more than 1 million vehicles a year. Currently, Changchun has 26 vehicle manufacturers and 416 producers of auto parts. Around one fifth of the city’s parts makers had an annual output value above 100 million yuan last year. About half of Changchun’s auto parts enterprises supply products for FAW plants, attracting Bosch, Johnson Controls, Delphi, ZF Group and Lear to build facilities in Changchun.

According to local government statistics, more than 60 percent of all Changchun investments made during the past three years have gone to the auto and auto parts industries. The city now has two national technology centers and 16 provincial research centers. The School of Automotive Engineering at Jilin University was selected as a national first-level discipline.

In pace with the national plan to upgrade and strengthen the auto industry, the Changchun government is formulating a strategy to increase production capacity and locally made parts procurement. Local authorities emphasized the need for optimized industrial structure, stronger R&D ability and better services. They also expect Changchun could become an important production base for new-energy vehicles.

Guangzhou

Guangdong, the richest region in China, is not only a major auto manufacturing base, but also the largest auto possessor, with possession of civil vehicles hitting 4.29 million units in 2006, accounting for 11.6% of the country’s total possession of civil vehicles. The province’s new registration of civil vehicles and possession of private vehicles were also ranked first in China.

With the settlement of the three large Japanese car manufacturers at Guangzhou, Guangzhou’s automotive industry presents a group-developing situation, with several auto parts suppliers having gathered there. It´s automotive centers include: Guangzhou Development Zone, which is a relatively concentrated parts producing area with about 70 foreign parts suppliers settled down there and with a total investment of one billion US dollars, out of which 30% are Japanese companies that provide parts for Guangzhou Honda.; Huadu Automobile City, which integrates a modern production base that combines automotive manufacture with auto R&D, auto parts production, auto trade services, auto logistics, auto fair, auto science, technology and IT services, auto culture and tourism; Nansha Development Zone.

Shanghai

Shanghai Automotive City is one of the oldest and most consolidated automotive clusters in China. It comprises the Auto Parts Industrial Park of the Shanghai International Auto City, the Jiading Huangdu Industrial Zone and the Jiading Nanxiang High-Tech Park.

In the next and last article of this series, I will go through some of the characteristics of the Chinese automotive market and attempt to draft a possible strategy for investing in China’s automotive industry. I hope you have enjoyed this article and look forward to seeing you in the next post.