Accessories quietly increase the cost of the car every year increased by thousands of dollars
Although many believe the global automotive industry has been heavily impacted by the current economic downturn, iSuppli's research suggests that the Chinese auto electronics market could still see moderate growth despite these challenges. So what’s fueling this growth?
The primary driver of growth in China’s automotive electronics market is expected to come from the powertrain sector, which is benefiting from the government’s economic stimulus initiatives. According to iSuppli Corporation, the revenue generated by China’s powertrain market in 2009 is projected to reach $2.8 billion, marking a 19.2% increase compared to 2008.
At the heart of this growth is the engine management system (EMS), which remains the most critical component of powertrain technology. The EMS market is anticipated to grow even faster, with shipments expected to reach 10.2 million units in 2009—an increase of 15.3% over 2008. As the powertrain market expands, semiconductor consumption in this sector is also expected to rise significantly, reaching $479.5 million in 2009, up 17.7% from 2008. By 2013, the market is projected to hit $1.04 billion, with a compound annual growth rate of 22.1% between 2008 and 2013.
**Short-Term Stimulus**
Under China’s national auto industry stimulus plan, the purchase tax for vehicles with engines of 1.6 liters or smaller was reduced to 5% from January 20 to December 31, 2009. Additionally, a $730 million (approximately 5 billion yuan) subsidy was allocated to encourage farmers to replace tricycles and slow trucks with light trucks and small vans that have engines under 1.3 liters. This subsidy was available only between March 1 and December 31, 2009.
These policies had an immediate positive impact on the market. In the first two months of 2009, sales of small passenger cars surged by 18.8% compared to the same period in 2008. In 2008, such vehicles accounted for 61.5% of total passenger car sales, with a total of 3.1 million units sold. Due to high demand, some car prices even increased.
Newly purchased tricycles and low-speed trucks in rural areas were not included in total vehicle sales figures. In 2007, sales of these vehicles exceeded 2.1 million. The 2009 purchase subsidies covered both new and existing vehicles, totaling more than 9 million units. With a 5% replacement rate, this initiative is expected to boost new consumption by 450,000 units—representing a 4.8% increase over 2008.
**Long-Term Vision**
While diesel vehicles are widely used in Europe, they have not gained much traction in China. According to data from the German Automobile Industry Association (VDA), in 2006, 69.1% of new passenger cars in France were diesel-powered, compared to 58.4% in Germany and 64.7% in Italy. However, in China, only 1% of passenger cars in 2008 were diesel vehicles.
Historically, the Chinese government supported diesel technology due to its energy efficiency and maturity. A national energy strategy was even developed to promote clean diesel vehicles. However, with the global economic crisis, these plans were delayed.
Now, the government is using this moment to upgrade the entire automotive supply chain. In the recent economic stimulus plan, electric and new energy vehicles have become the main focus. The Ministry of Finance will provide subsidies to support the promotion of new energy vehicles in major Chinese cities. Over the next three years, approximately $1.46 billion (10 billion yuan) will be invested in Chinese automakers.
As Chinese companies enhance their R&D capabilities and benefit from government support, hybrid and electric vehicles are set to accelerate their development. iSuppli forecasts that by 2013, hybrid electric vehicles (HEVs) will reach 1.4 million units, while electric vehicles (EVs) will reach 448,000 units. The hybrid electronic control unit (HECU) is expected to become a key investment area in the Chinese powertrain market over the next five years.
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