China's exports of brake parts are rising steeply, with overseas shipments expected to increase 30 percent from just over US$1 billion in 2005 to US$1.4 billion in 2006.
Figures for the first four months of 2006 exceeded US$418 million. This value already accounts for more than 37 percent of the country's total exports in 2005, and is 27 percent higher than shipments in the same period last year.
Sales from overseas shipments increased at an average rate of 43 percent in each of the past two years.
The following are some of the key trends we see in China's brake parts industry:
• Most suppliers will continue to export primarily to the aftermarket. Nevertheless, the number of makers expanding into OEM/OES business will continue to grow as more companies upgrade their manufacturing systems to meet stringent requirements in this sector.
• Prices of brake parts will go up in coming months, although adjustments will be limited to 10 percent as part of suppliers' efforts to remain competitive.
• In anticipation of higher demand, most suppliers will increase their production capacity by upgrading existing facilities or setting up new factories. Some companies will invest in automated equipment to shorten delivery lead times.
• Production of asbestos brake pads and shoes will continue to decline, as more suppliers target the US and the EU, which have stringent standards that regulate or prohibit the use of the material. New releases will made of a variety of asbestos-free materials that range from semi metallic and organic to ceramic-based formulations.
This report covers brake pads, shoes, discs and drums, the four biggest brake part categories produced in China.
The Products & Prices section concentrates on the various material compositions of each category, which is the key factor that determines product performance.
The main steps in the production of brake pads, shoes, discs and drums are discussed in the Manufacturing section.
A comparison of the production capability and equipment of small, midsize and large suppliers of brake parts is also provided.
The 700-strong supplier base is split practically even between those that manufacture brake pads and shoes and those that make brake discs and drums.
The majority of makers are locally owned. However, state-owned and collective enterprises played a crucial role in the development of the brake parts industry in China as many of the private companies started out as SOEs.
The Industry Overview elaborates on the composition of China's brake parts supplier base, highlighting the key characteristics and capability of the different types of makers. The overwhelming majority of these suppliers concentrate on one or two categories. A few, however, offer all product types.
This report profiles some of the key brake part makers in China. Twenty-five of these suppliers are based in Shandong, which is the biggest brake part exporting province in China.
These makers include Shandong Gold, which can produce more than 40 million brake pads and shoes in a year. An additional 24 makers come from Zhejiang, which is a major source of brake pads and shoes in China.
Industry Overview
China's brake part exports are on the rise, registering an average growth rate of 43 percent in each of the past two years. Shipments in 2005 rose 38 percent to exceed US$1 billion.
All signs point to another strong year as exports in the first four months of 2006 are already 27 percent higher than the same period last year. This is despite the fact that the industry is heavily reliant on the domestic market, with only 20 to 30 percent of output currently shipped overseas.
Exports will continue to increase steadily in coming years as more China suppliers, driven by intensifying domestic price competition, develop or expand their overseas customer base.
North America will remain the primary market for most China-made brake parts. More than half of exports are already shipped to the region, which generated US$541 million in revenue last year. The US alone procured US$493 million worth of products, making it the largest single-country importer of brake parts from China.
Europe is the next biggest market, absorbing more than 20 percent of exports. The region imported US$247 million worth of brake parts last year, with most going to Germany, the UK and Italy.
Many China suppliers are striving to establish or expand their presence in Europe to reduce their reliance on the US market.
Midsize and large suppliers, in particular, are targeting the EU. Only a few China makers are currently exporting to the region because of the large investment needed to develop and produce brake parts suitable for the midrange and high-end vehicles that are popular there.
The cost of obtaining ECE-R90 certification, which can reach up to US$300,000 per model, is another major constraint to market entry. Compliance with the requirements of ECE-R90 is mandatory for all aftermarket brake parts shipped to the EU.
Limited OEM/OES business
Aftermarket or replacement models currently account for about 80 percent of China's exports of brake parts. They will continue to dominate output because of the high entry barriers to the international OEM/OES market.
Less than 20 percent of exported products currently go into the assembly lines or accredited service centers of carmakers. Most China suppliers find it difficult to break into the OEM/OES segment because of more stringent product, manufacturing and delivery requirements of clients. Makers are often required to meet international automotive industry standards such as VDA 6.1, QS-9000 and ISO/TS 16949 to be an accredited supplier.
In addition, most top carmakers have long-standing relationships with major brake part suppliers such as the TMD Friction Group of Germany, the Util Group of Italy and Japan-based Akebono Brake Industry Co. Ltd.
This factor is limiting in particular, OEM/OES business of midsize and large suppliers in China primarily to the domestic market despite ISO/TS 16949 compliance.
Shandong Longji is one of the few makers currently shipping a substantial portion of exports on an OEM/OES basis. The company is VDA 6.1-, QS-9000- and ISO/TS 16949-certified and counts among its clients TRW Automotive, one of the world's largest makers of brakes and other automotive parts. Shandong Longji also supplies to Proton of Malaysia.
Shandong Gold, which has obtained QS-9000 and VDA6.1 certification, supplies ACDelco of the US with brake parts on an OES basis. The company also complies with ISO 9001 and 14001 and OHS 18000 standards.
Supplier Profile
Anchi Auto Brake (Shenzhen) Co. Ltd
Established in 1994, Anchi specializes in the manufacture of brake shoes for passenger cars. Products are designed solely for the high-end aftermarket and the company has no plans of venturing into OEM business.
Anchi currently operates at full capacity, producing 200,000 sets per month. It will be purchasing new equipment to boost monthly output to 300,000 sets by the end of the year to cope with increasing overseas demand. The new automatic drilling machine will be operational by July this year. In addition, the company will be buying its first dynamometer before 2009.
Production at Anchi is heavily export-oriented and output is shipped mainly to the EU and the US. The company first penetrated the European market in 2001 and started sending products to the US in 2004. It plans to boost export sales more than 20 percent by increasing shipments to the US.
Products
Anchi offers more than 700 models of brake shoes, mostly for passenger cars under US, European, Japan and South Korea brands.
Products have a service life of 50,000km and can perform well even under high temperatures as they adopt Hong Kong and Japan technology. This high technological capability enables Anchi to compete directly with upscale Taiwan brake shoe manufacturers.
Semimetallic brake shoes are the company's main product line, accounting for 70 percent of output. Models made of nonasbestos organic materials are the next major category, constituting more than 20 percent of output. The remaining 10 percent consists of asbestos models, although Anchi plans to decrease this further in response to stringent regulations banning the use of asbestos on brake parts.
The R&D team introduces about 20 models each month, requiring 30 days to develop a new item for volume production. Most of the new releases target the North America market.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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