China's auto industry's future profitability space in spare parts and aftermarket

The world’s leading business consulting company, Ai Ruibo, released the latest research report—“China Automotive Industry Outlook 2011”. It is optimistic about the outlook of the Chinese auto industry and optimistic about auto parts and aftermarket.

After achieving high growth rates of nearly 50% and over 32% in 2009 and 2010, respectively, in the first quarter of 2011, the growth rate of China's light vehicle sales fell sharply to 9%, while the growth rate in April fell to 3%. The introduction of government stimulus policies and the implementation of new car restriction policies in major cities have made the Chinese auto market lack of growth.

The research report predicts that Chinese auto parts suppliers will achieve strong growth in the next few years compared with the moderate growth of local automakers, among which the aftermarket is a major development opportunity. According to statistics, China's auto parts sales increased by 44% last year, which is higher than the growth rate of 37% of total vehicle sales, reaching more than RMB 16,000 million. The substantial increase in demand in the aftermarket will undoubtedly further benefit auto parts manufacturers. According to the report data, in 2010, the sales revenue of China's service and parts after-sales market reached RMB 224 billion. It is expected that by 2014, this figure will increase to 625 billion yuan.

Compared with vehicle sales, auto parts sales and service have higher profitability. Since 2009, China's auto parts suppliers have consistently occupied the highest position in global profits. Last year's profit rate reached 10%, which was higher than 7.6% of the total vehicle dealer's operating margin. Ai Ruibo analysis, taking the automobile sales group Zhongsheng as an example, in 2010, the gross profit of new car sales of the Group accounted for only 5.8% of the total gross profit, and the percentage of service gross profit reached 48.9%.