China’s underdeveloped local supply base

The Chinese automotive production sector remains significantly fragmented both at the OEM and supplier level. OEM consolidation process has been slow and ineffective despite government’s commitment to have only four major players plus four or five minor ones in the long term. We look at the reasons behind China’s lack of a truly localised automotive supply base

OEMs operating in China have had to cope and are still coping to a certain extent with the lack of development of the local supplier industry, which can be ascribed to different historical factors. The historical sourcing preference of domestic OEMs was to produce as much as possible in-house, an operating model that started to change as the Chinese car market developed in sophistication and required foreign technology.