A strong demand outlook, coupled with an increase in domestic auto production, suggests immense opportunities for auto component suppliers. Increased investments by auto parts manufacturers have reinforced.
China will drive auto demand in Asia over the coming years, auto component suppliers will be able to benefit from the localisation of auto production in the country. From January to October, total domestic auto sales have grown by 6.6% year-on-year (y-o-y), while passenger car sales have grown by 9.7% y-o-y. Beyond 2014, auto sales to grow by 27.9%, between 2014 and 2018 to 29.8mn units, underpinned by rising income levels and a relatively low passenger car density contributing to the sector’s growth potential.
In line with our bullish outlook on vehicle demand in China, automakers are planning to ramp up production over the coming years. Volkswagen (VW) announced in November that it will increase its plant capacity in China to more than 4.0mn units a year by 2018, up from 3.1mn in 2013. Sales growth for the automaker in China slowed to 10.0% y-o-y in October, with VW attributing the slowdown to a lack of production capacity within the country. Similarly, General Motors Company (GM) laid out bold plans in October to invest USD14.0bn between 2014 and 2018 and aims to raise its production capacity in China to around 5.0mn units by 2018.
China – Domestic Passenger Car Sales, Units; % chg y-o-y (RHS)