As the basis for the development of the automobile industry, the auto parts industry is a long-term key industry supported by the state. As a big country in automobile production and sales, China has been ranked first in the world for 14 consecutive years.

Development Situation and Trend of Auto Parts Industry in China

In recent years, with the support of major national projects and technology projects, China's auto parts industry has continued to strengthen technological research and innovation system construction through independent research and development, joint ventures and cooperation, and the introduction of technical talents, and gradually achieved breakthroughs in core technologies in some fields. The independent innovation system of Chinese brand auto parts has taken shape.

Through years of development, most of the Chinese brand parts companies have strong manufacturing capabilities and certain market competitiveness. The enterprise system management and modular supply capabilities have been improved. Through differentiated multi-level development and concentric diversification promotion, The scale has expanded rapidly, and synergies have been formed between various sub-sectors.

Domestic auto parts enterprises already have the industrialization capacity of passenger car and commercial vehicle parts systems, parts and subsystems, and achieve comprehensive product coverage. After years of development, China has formed six major auto parts industry clusters in the Northeast, Beijing-Tianjin-Hebei, Central, Southwest, Pearl River Delta and Yangtze River Delta. As the downward pressure on the automotive industry continues to increase, the overall development of the auto parts market is in good condition, showing a trend of medium and high speed development. Under the trend of globalization, domestic auto parts companies adopt mergers and reorganizations, overseas mergers and acquisitions, equity joint ventures, joint ventures and cooperation to accelerate their expansion and integration into the world's parts procurement system and go global.

Global Auto Parts Industry Scale and Market Share

With the continuous innovation of the automobile industry, more and more new technologies are applied to the auto parts industry. For example, intelligent technology, digital technology, artificial intelligence, Internet of Things and other technologies are completely changing the production and service methods of the auto parts industry. At the same time, new materials and new processes are also emerging. For example, new materials and processes such as carbon fiber and 3D printing are gradually being applied to the manufacture of auto parts to improve product quality and production efficiency.

At present, most of the domestic auto parts manufacturers continue to maintain a profitable trend, but there are not a few companies with negative growth in revenue and net profit year-on-year changes, and there are still some auto parts manufacturers that continue to lose money. In addition, compared with the first half of 2022, a small number of enterprises gradually turned from profit to loss in the third quarter, and even the former "performance dark horse" also performed mediocre in that quarter.

The company with the brightest results in the third quarter of 2022 is Huayuan Auto. During the reporting period, the company achieved revenue of 44.564 billion billion yuan in the third quarter, up 32.14 percent from the same period last year, and net profit of 2.36 billion billion yuan, up 19.70 percent from the same period last year. In the first three quarters, revenue was 113.313 billion billion yuan, up 12.94 percent from the same period last year, while net profit was 4.878 billion billion yuan, up 3.74 percent from the same period last year. Huayuan Auto was the company with the highest revenue and net profit during the same period, and the year-on-year growth rate remained positive.

However, it is worth noting that in the first half of 2022, BOE A was the leader among the 25 auto parts manufacturers within the scope of Gestapo statistics. BOE A achieved revenue of 9.61 billion yuan and net profit of 6.596 billion yuan in the first half of this year, but at that time its downward trend was already obvious, with revenue and net profit both falling year-on-year, at -15.66 and -48.94 respectively.

By the third quarter of 2022, BOE A achieved revenue of 41.114 billion billion yuan, a year-on-year decrease of 26.79; net profit loss of 1.305 billion billion yuan, a year-on-year decrease of 118.01. In the first three quarters, revenue was 132.744 billion yuan, down 19.45 percent from the same period last year, while net profit was 5.291 billion yuan, down 73.75 percent from the same period last year.

In addition, Qianfang Technology and Four-dimensional Tuxin (002405) continued the trend in the first half of 2022 and continued to lose money in the third quarter of 2022.

Specifically, Qianfang Technology achieved revenue of 1.728 billion yuan in the third quarter, a year-on-year decrease of 34.25; net profit loss of 0.094 billion yuan, a year-on-year decrease of 293.32. In the first three quarters, revenue was 4.844 billion yuan, down 28.25 percent from the same period last year, while net profit loss was 0.187 billion yuan, down 133.64 percent from the same period last year. In this regard, Qianfang Technology said that the company's operating income and net profit from the beginning of the year to the end of the reporting period decreased compared with the same period last year, mainly due to the impact of the epidemic, its products and solutions sales have declined.

According to the "2023-2028 China Auto Parts Industry Competition Analysis and Development Prospects Forecast Report" by the China Research Institute of Puhua Research Institute, it shows:

April retail sales data smooth recovery

Production: Domestic narrow passenger car production in April was +77.4% YoY/15.7% YoY to 1.759 million units, and cumulative production in April 2023 was +7.7% YoY to 6.854 million units. Retail: April retail sales were +55.5% YoY/+2.5% YoY to 1.63 million units, and cumulative sales in April 2023 were -1.3% YoY to 5.895 million units. Wholesale: April wholesale sales year-on-year plus 87.6/month-on-month -10.0 to 1.788 million units, before April 2023 cumulative sales year-on-year plus 6.9 to 6.841 million units.

Production and sales of new energy vehicles fell month-on-month in April.

Production: New energy passenger car production in April was +104.7% YoY/4.0% YoY to 603000 units, and cumulative production in the first four months of 2023 was +41.3% YoY to 2.144 million units. Retail: April YoY +85.6/QoQ -3.6 to 527000 vehicles (penetration +5.2pcts/QoQ -1.9pcts to 32.3), and cumulative sales in pre-April 2023 YoY +36.0 to 1.843 million vehicles (penetration +8.6pcts to 31.3). Wholesale: April YoY +115.6/QoQ -1.7 to 607000 vehicles (penetration +4.5pcts YoY/QoQ +2.9pcts to 33.9), and cumulative sales in pre-April 2023 YoY +43.0 to 2.108 million vehicles (penetration +7.8pcts YoY to 30.8). 1) April from the main brand wholesale penetration rate of 3.1pcts to 49.5, retail penetration rate of 1.8pcts to 56.5, 2) April Tesla wholesale month-on-month -14.7 to 76000 vehicles, retail month-on-month -47.9 to 40000 vehicles.

New energy to the countryside strategy continues, sinking market sales are expected to grow further

Recently, the central-level policy guidelines related to new energy vehicles have been issued one after another, and the 5/5 National Standing Committee adopted the implementation opinions on accelerating the construction of charging infrastructure and better supporting the new energy vehicles to the countryside and rural revitalization. We believe that 1) Since 2020, the Ministry of Industry and Information Technology and other ministries and commissions have carried out the policy of new energy vehicles to the countryside for three consecutive years, and the growth rate of new energy vehicles on the third and fourth-tier cities and below is higher than the overall growth rate. 2)2023/3 three-line, four-line, county and township pure electric penetration rate is 23%/19%/16%(vs. overall pure electric penetration rate is 23%), and the insertion and mixing penetration rate is 9%/9%/8%(vs. overall insertion and mixing penetration rate is 10%). Overlay new energy to the countryside models rich/cost-effective models launched, as well as charging facilities to improve and other factors, we judge the sinking market growth space certainty is strong.

Analysis on the Development Status of Auto Parts Suppliers

Public information shows: Bosch Group (BOSCH GROUP) was established in 1886 and is headquartered in Gringen-Shrejo, Germany. The company covers more than 60 countries and regions around the world and has about 420,300 employees. Its business is divided into four major areas: automotive and intelligent transportation technology, industrial technology, consumer goods (household appliances and power tools), energy and construction technology.

Bosch's automotive chassis systems, energy and body systems, automotive multimedia systems, and automotive electronic systems are world-renowned. It is no exaggeration to say that in the absence of Bosch parts, it is difficult for the main engine factory to build a complete new car.

In order to cope with the wave of new energy vehicles and autonomous driving, Bosch set up the Intelligent Driving and Control Division in 2021 to integrate four control-related teams, including power control domain, intelligent cockpit domain, chassis control domain and autonomous driving, focusing on the three major areas of intelligent cockpit, intelligent driving and intelligent networking.

In 2020, China will become the largest single market for the Bosch Group (with a contribution of more than 1/5) and the country with the largest number of employees outside Germany. Sales in China reached 18.7 billion billion euros (137.7 billion yuan) last year, up 3.2 percent from a year earlier.

80% of Chinese-made products remain in China, and new car-making forces such as Weilai, Ideal and Xiaopeng all use the iBooster system developed by Bosch. At the same time, adhere to the "localization" strategy, invested in Yilaike, magnesium robot, Huada Beidou, four-dimensional Zhilian, Hesai technology and other enterprises, in new energy, automatic driving and other key areas to deepen the layout.