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Over recent years, it has become evident that foreign investment in the Chinese auto parts sector is shifting toward direct ownership or full control of joint ventures. What was once a gradual entry into the market is now a more aggressive strategy, with foreign firms acquiring majority or even full stakes in local companies. This trend is reshaping the landscape of the industry and raising alarms among domestic players.
â– Foreign Capital Monopoly Is Becoming the Norm
The case of WABCO acquiring Shandong Weiming China’s equity to turn it into a wholly-owned subsidiary is not an isolated incident. In 2010, Bosch Automotive Components (Nanjing) Co., Ltd. converted its joint venture into a fully owned subsidiary. Similarly, in 2013, Remy International acquired a 49% stake from its Chinese partner, gaining full control over the joint venture. These examples highlight a shift in foreign strategies—moving from joint ventures to full ownership, which allows greater control and profit margins.
A review of ten major foreign-funded enterprises in China reveals that the number of wholly-owned subsidiaries now exceeds that of joint ventures. Industry insiders agree that this trend is accelerating, with foreign investors increasingly choosing direct investment over partnerships.
Gu Yifan, Secretary-General of the Brake Committee at the China Association of Automobile Manufacturers, stated, “In the auto parts industry, all the high-margin, high-value components are under foreign control. If they aren’t fully owned, they’re moving in that direction. These are the key parts that require advanced technology and are positioned at the top of the value chain. While we understand the impact on domestic companies, we feel powerless against this trend.â€
An executive from a domestic automaker explained, “After years of joint ventures, Chinese partners have gradually lost their technical expertise, quality management skills, and operational efficiency. As foreign companies become more localized and self-sufficient, there’s less need for joint ventures. That’s why we see so many turning into sole proprietorships.â€
â– Multiple Factors Lead to the Decline of Independent Enterprises
Success doesn’t happen overnight, and neither does failure. It’s not just one factor that leads to the decline of domestic auto parts companies.
Liu Houfu, General Manager of Shandong Mingshui Auto Parts Co., Ltd., pointed out that foreign investors are drawn to China’s large market. Once they secure a foothold, they don’t intend to give up their advantage. Instead, they focus on maintaining control and preventing real technological advancement in China. While there are exceptions, most joint ventures fail to deliver mutual benefits.
Through the “curve to save the country†approach of joint ventures, domestic companies have struggled to compete with foreign capital. They’ve been outmaneuvered in terms of technology, production, and management. Despite the booming automotive industry, core technologies remain in foreign hands, making it difficult for independent brands to grow.
Chen Qisheng, Executive Vice President of Zhejiang Libang Hexin Auto Brake System Co., Ltd., warned, “Under pressure from foreign capital, China’s brake systems are falling behind. The most critical technologies are controlled by foreign firms. I’m particularly concerned about the integration of braking and electronic systems, as many domestic companies can’t keep up.â€
The reporter believes that for domestic auto parts companies to thrive, they need market access. However, branded automakers are often reluctant to provide such opportunities. Using domestic products requires extensive testing, which is time-consuming and costly. Even if successful, there’s a risk that the car model may be phased out, making the investment unprofitable.
All these factors contribute to the increasing dominance of foreign capital, leaving domestic companies struggling to compete and grow.
â– Breaking the Game Requires Collaboration
After the interviews, the reporter felt deeply concerned—not only about how domestic companies are being sidelined, but also about their long-term survival.
When asked how to respond to foreign capital’s influence, Gu Yifan said, “We can’t stop this trend on our own. The auto parts industry didn’t set limits on joint venture ratios or foreign ownership from the start. Although we recognized the problem early, it’s hard for individual companies to resist. National policies and broader strategies are needed to support domestic firms and help them compete.â€
Many companies believe that unity is key. Domestic auto parts firms should work together to counter foreign influence. “Strong dragons don’t fear the snake,†and when Chinese companies unite, they can create a powerful force.
Moreover, collaboration isn’t just between parts companies—it also involves automakers. The market is where component companies shine, and automakers must offer opportunities for domestic suppliers. Only through mutual cooperation can both sides grow and develop. This kind of synergy can lead to breakthroughs and help overcome the dominance of foreign capital.
Abstract In 2013, China's automobile sales reached 2,194,410 vehicles. To date, the number of automobiles in use has surpassed 140 million. This massive market demand undoubtedly creates vast opportunities for auto parts companies, but behind this growth lies a growing concern: foreign capital is increasingly taking control of the domestic auto parts industry.