Source: The following is excerpted from a blog by Lapinus providing an overview of China’s automotive market and summarizes original equipment brake pad developments.
ROERMOND, Netherlands – 1985 saw the establishment of SAIC Volkswagen Automotive Co., Ltd, the first car joint venture on the China mainland. Since then, China has continuously introduced foreign technologies to develop the automotive industry. And since the end of the 1990s, some local brand car makers have started developing independent car production, which has grown rapidly.
After the China Association of Automobile Manufacturers joined the WTO at the end of 2001, the Chinese automotive industry grew extremely quickly – in both market size and production scale. It is now fully integrated into the world’s automotive industry and has become a large producer. In 2009, China’s annual automotive production and sales volume for the first time passed that of the United States, ranking it as the top 1 manufacturer in the world. It still holds this position today.
In the second half of 2018, however, China’s automotive market shrank for the first time in recent years. In 2019, it showed further negative growth. There is no sign that the slowdown will end soon, and it is now suffering from the effects of the global COVID-19 pandemic too. That makes the market even more uncertain in 2020. Experts have predicted that the negative growth will continue into the near future, and some car companies are already in crisis.
According to China News, the number of civilian vehicles in China reached 261 million by the end of 2019, including 226 million private vehicles. That basically means one car per household. However, car ownership per thousand people reached 170+ at the end of 2019 which is about 1/5th of that in the United States. So, there is still a big gap between China and many other nations. The country’s per capita income level is still far behind that of countries in the West. Moreover, in tier 1 and 2 cities traffic congestion, traffic restrictions, parking difficulties, license restrictions, purchase restrictions and so on are further reducing car demand. But in the long run, with the development of China’s economy, car ownership per thousand people will continue to increase.
Passenger Car Disc Pad (PCDP) OE supplying structure
In 2019, the sales volume of each of the major car series was made up of around 35 percent local brands, 29 percent European, 28 percent Japanese and South Korean, and eight percent American. And the major brake system producers are European, Japanese, Korean and local. So too are the main OE friction players.
Brake system suppliers differ depending on the car maker:
- Local brand car makers choose mainly local, European and Korean brands. High-end car models use more European brand calipers, while medium & low-end models choose local and Korean brake system suppliers. For benchmarking car models, they will generally choose the same suppliers as do others. Local brand car makers often choose “European brand calipers + local brand brake pads” or “local brand calipers + European brand brake pads”. That is because these combinations can reduce costs while assuring good quality. As the Chinese automotive industry has developed, more and more car makers have improved their knowledge and research & development of auto parts. They not only directly nominate tier one suppliers of brake systems, but also limit the range of brake pad suppliers and even the friction material formulation. At present, though, very few car makers still directly nominate brake pad suppliers and their friction material formulation.
- European car makers mainly choose European brand calipers and brake pad suppliers. Because of costs, European car makers are also starting to use Korean and local brand calipers (and Korean brake pad suppliers) for some car models. Only the very few models that are outside their production expiry dates or have been developed independently adopt local brake pads. European car makers also attach great importance to selecting their brake pad suppliers, either nominated at their headquarters in Europe or defined within a range. Friction producers who have not committed to getting the business by entering the car producer supplier system must start from benchmarking and will find approval difficult.
- Japanese and Korean car makers mainly use suppliers from their own countries. A small number of models will of course also use European or local brand calipers and brake pads.
- American car manufacturers generally choose European calipers and European, South Korean or Japanese brake pads. With increasing cost pressures, they are looking to make changes.
In short, the major OE brake pad players are still dominated by foreign brands, while local brands are gradually expanding their market share.
The entire blog can be viewed by clicking HERE.