Mr. Wang, the deputy general manager of a joint venture in the south, recently shared his feelings about leaving the company after ten years of work. "In a few days, I will leave this joint venture and return to my original state-owned enterprise. It’s hard to say goodbye to a place that has been part of my life for so long," he said. His contract with the joint venture is set to end at the end of the year, and due to the foreign company's absolute control over the joint venture, he will be let go.
Faced with reporters, Mr. Wang expressed deep concerns about the future of the company. "The joint venture was supposed to be a win-win situation, but in reality, we had no real say. We were always led by the foreign side, without any opportunity to develop new products or master core technologies. How can a company have a future if it doesn’t control its own technology, brand, or market? Now, everything is dominated by foreign companies, and our internal resources are being drained—there’s no real production or management function left."
According to industry data, China's auto parts sector generated 440 billion yuan in sales in 2004, nearly matching the entire vehicle industry. However, beneath this growth lies a growing concern: the increasing dominance of foreign investment in the domestic auto parts market. Industry insiders worry that more multinational companies are shifting from joint ventures to sole proprietorships, and even existing joint ventures are gradually transferring control to foreign entities. Core technologies remain firmly in foreign hands, raising fears that the entire auto parts industry could eventually be fully controlled by foreign interests.
The trend of foreign dominance is becoming more evident. The value chain of the Chinese automotive industry is shifting toward components, and with rising demand for vehicles, the need for reliable and advanced auto parts is growing. According to a report by the State Council Development Research Center, China's car ownership is expected to reach 35.63 million in 2005, 56.69 million in 2010, and over 100 million by 2020. Despite this potential, China's auto parts industry still has a long way to go in terms of quality, innovation, and technological advancement.
Currently, over 70% of the world's top 100 auto parts suppliers operate in China, with more than 1,200 foreign-owned or joint-venture companies active in the sector. Foreign investment accounts for over 60% of the auto parts market, and in high-tech areas like automotive electronics and engine parts, foreign-controlled firms dominate with up to 90% market share.
Take Shanghai United Automotive Electronics, a joint venture between Germany’s Bosch and China United Automotive Electronics Co., Ltd. Established in 1996 as a milestone in the auto parts industry, the company was once seen as a success story. However, recent reports reveal that it is now fully controlled by Bosch. The German company used a clever strategy: first entering the market through a joint venture, then gradually transferring profits to its subsidiaries by selling high-priced components. This left the joint venture struggling financially. At the same time, Bosch demanded a larger stake in the company, threatening to withhold advanced technology unless its demands were met.
Experts believe that many foreign firms prefer to establish wholly-owned enterprises rather than joint ventures. Some even push for majority control under the guise of cooperation, aiming to protect their technology and maximize profits. These tactics are making joint ventures less attractive and more one-sided.
Domestic auto parts companies face significant challenges compared to their global counterparts. They often have small production scales, limited product diversity, and weak competitiveness. Many lack the core technologies and R&D capabilities needed to compete effectively. In China’s auto parts industry, numerous companies have annual sales below 1 million yuan, and the top ten companies collectively hold less than 11% of the market. Most local companies are stuck at the lower end of the automotive supply chain.
Globally, the auto parts industry is moving toward cost efficiency, with large-scale reorganization and specialization creating a tiered structure of major, mid-sized, and smaller players. As China reduces auto parts tariffs, vehicle manufacturers are increasingly turning to global sourcing. Without strong R&D and technological capabilities, domestic parts companies risk being squeezed out or acquired.
The National Development and Reform Commission recently issued a warning, stating that China's auto industry has become overly dependent on foreign capital. "Joint ventures don't necessarily improve technical capabilities because the foreign partner controls the direction," Mr. Wang noted. He also pointed out that foreign-funded auto parts companies spend only 0.97% of their revenue on R&D, compared to 1.21% for domestic firms.
Foreign companies are exploiting China’s technical weaknesses to maintain their dominance in the supply chain. Without access to critical information or decision-making power, Chinese joint ventures struggle to control procurement costs. As a result, joint ventures are no longer the ideal path forward.
The original goal of joint ventures was to bring in foreign technology, products, and management to enhance China’s R&D capabilities. However, without independent innovation and strong core competencies, the long-term sustainability of China’s auto parts industry remains uncertain. Developing products with intellectual property rights and building competitive advantages is the only way forward.
Zeekr Car,Zeekr 009 Electric Minivan,4Motor Drive Zeeker,New Car Zeeker
Shaanxi WLB Auto Sales Co.Ltd. , https://www.wlbauto.com