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Over the past few years, it has become evident that foreign investment in China’s auto parts sector is shifting from traditional joint ventures to full ownership. Many international companies are either acquiring majority or full control of local partners or setting up their own factories directly. This transformation is not just a trend—it's a strategy being executed with precision and intent.
â– Foreign Capital Monopoly Is Becoming the Norm
The case of WABCO acquiring full ownership of Shandong Weiming is not an isolated incident. In 2010, Bosch completed the transition of its Nanjing-based joint venture into a wholly-owned subsidiary. In 2013, Remy International acquired a 49% stake from its Chinese partner, taking full control of the company. These examples illustrate a clear shift in how foreign firms are entering and dominating the Chinese auto parts market—moving from partnerships to full control.
A review of ten major foreign-funded enterprises in China shows that the number of wholly-owned subsidiaries has surpassed joint ventures. Industry insiders agree that the trend of foreign investors moving from joint ventures to sole proprietorships is accelerating. This change reflects a strategic move to maximize control and profit while minimizing reliance on local partners.
Gu Yifan, Secretary-General of the Brake Committee of the China Association of Automobile Manufacturers, said, “In the auto parts industry, the most profitable components are often controlled by foreign firms. If they aren’t fully owned, they’re moving in that direction. These are high-value, technically complex parts. While we understand the implications, we feel powerless against this trend.â€
A representative from a domestic automaker explained during an interview: “After years of joint ventures, Chinese companies have gradually lost ground in technical management, quality control, and operational efficiency. Meanwhile, foreign firms have matured in their localization strategies and no longer need joint ventures. That’s why many are turning to sole ownership.â€
â– Multiple Factors Are Leading to the Decline of Independent Enterprises
The saying goes, “A mountain does not rise without small stones,†and the decline of independent auto parts companies is not due to one single factor.
Liu Houfu, General Manager of Shandong Mingshui Auto Parts Co., Ltd., noted that foreign investors are drawn to China’s large market. Once they gain a foothold, they tend to maintain control rather than share it. As a result, domestic auto parts companies struggle to develop independently. While there are exceptions, the reality is that very few joint ventures lead to mutual benefits.
Through these joint ventures, many Chinese auto parts companies have been outcompeted by foreign players. Domestic firms lack the R&D capabilities, advanced production techniques, and management expertise needed to compete. Despite the booming automotive industry, key technologies remain in foreign hands, making it difficult for domestic brands to grow.
Chen Qisheng, Executive Vice President of Zhejiang Libang Hexin Auto Brake System Co., Ltd., expressed concerns about the situation: “Under the pressure of foreign capital, the core of the braking system is largely controlled by foreign companies. I worry about the integration of brake and electronic technologies, as many domestic companies can't keep up.â€
The reporter believes that for domestic parts companies to thrive, they need real opportunities. However, branded vehicle manufacturers are often hesitant to support them, citing the long and costly process of testing domestic products. Even if successful, there's a risk of the car model being phased out, making it economically unattractive.
All of this has led to a deepening foreign influence, leaving domestic companies struggling to survive and grow.
â– Breaking the Game Requires Collaboration Across All Sides
After the interviews, the reporter felt deeply concerned—not only about the loss of opportunities for domestic parts companies but also about their future.
Gu Yifan emphasized that it's impossible for individual companies to stop this trend. The industry didn’t regulate foreign ownership from the start, and even though the consequences were recognized early, it was too late to reverse the trend. He stressed the need for national policies and broader support to help domestic companies compete.
Unity is key. One auto parts company highlighted the importance of solidarity, suggesting that domestic firms should work together to counter foreign dominance. “Strong dragons don’t suppress the snake,†and when Chinese auto parts companies unite, they could create powerful resistance.
Moreover, collaboration between automakers and component suppliers is essential. The market is where component companies can shine, and vehicle manufacturers must provide opportunities for domestic suppliers. Only through cooperation can both sides achieve mutual growth. This synergy could be the breakthrough needed to challenge foreign capital and build a stronger domestic industry.
Abstract In 2013, China's automobile sales reached 2,194,410 units. As of now, the number of vehicles on the road in China has surpassed 140 million. This massive market demand presents a vast opportunity for auto parts companies, but behind this growth lies a growing concern: foreign capital is increasingly penetrating the domestic auto parts industry.