China has seen plenty of EV companies emerge and the competition between car parts suppliers grows intense. Supply chain sources said if a component maker cannot offer indispensable products, it will have difficulty surviving in the Chinese market.
Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), has said China's 2023 car sales are expected to reach 29.5 million vehicles, a record high. The country has experienced positive growth in sales for two consecutive years.
China's car component sector has scaled up, seeing increasing demand and more suppliers. As domestic competition in the Chinese car market intensifies, the rivalry among suppliers also has heated up.
Taiwan-based supply chain sources said the price war has continued since China started to foster EV development. Many automotive suppliers have been eliminated, as have emerging EV companies. Although the Chinese automotive market has expanded rapidly, only some players can survive and earn profits. The situation is more evident in the EV sector.
Sources said suppliers must closely monitor customer order pull-ins and hold their bottom lines in the price war. Moreover, the Chinese government would ask them to increase the local production rate, adding more uncertainty to their market development.
The best opportunity for suppliers to enter the Chinese market has passed unless they can provide unique and indispensable solutions, sources said. Taiwan's automotive industry has a history of about 70 years. The best time to expand to China was before 1989 when the local ecosystem was developing.
The situation in the Chinese car market has evolved dramatically. Leading automakers can maintain order pull-ins due to their high market share, while those falling behind focus on surviving.
It is common for carmakers to stop or cut order pull-ins after completing deliveries. In addition, more foreign-based automakers are moving their production lines out of China. Both situations have created pressure for component suppliers.
Many Chinese carmakers have faced the challenge of decreasing demand. While inventory adjustments have been closed to the end, the ongoing price war and uncertainties brought by policies make Taiwan-based suppliers hesitant to enter the market.
