Risk from counterfeiters to increase as China's auto-parts market to double in size by 2019

Motors News Friday September 19, 2014 15:39 —PRESS RELEASE LOCAL

Bangkok--19 Sep--Ipsos Business Consulting Overview: China's automotive components sector is set to achieve annual growth of 20 per cent for the next five years driven by demand for new cars and a growing secondary market. The aftermarket segment will become the main outlet for automotive parts as the average age of vehicles on the road continues to rise and the current total car population has already surpassed 100 million. The counterfeit auto parts market, already the world's largest with a current value of about US$40bn, will only increase as the overall market grows. Implications: Central government has progressed with implementing new intellectual property (IP) laws, however, application and enforcement remains inconsistent and insufficient at regional and local levels. As a result, manufacturers must develop IP protection as standard practice to counter the threat from copycats which is expected to rise as the market expands. IBC Perspective: Rising demand in both the car and auto parts markets provide significant growth opportunities for manufacturers. Foreign-invested enterprises currently account for about one-third of the parts market's output. They are expected to consolidate this position given foreign firms more stringent IP protection practices and their greater affinity for mergers and acquisitions, which will be a key growth strategy. SHANGHAI: 18 September 2014 – Ipsos Business Consulting, a leader in fact-based business consulting, has published new research highlighting the risks posed by counterfeiters in China's fast-growing automotive parts market. Ipsos Business Consulting research, entitled "Trends in China's Automotive Component Manufacturing Industry", highlights how auto parts manufacturers must rapidly improve their intellectual property (IP) protection process to mitigate threats from counterfeiters which will only increase as the auto parts industry is set to double in size over the next five years. Foreign companies operating in the market may be able to use their better established anti-piracy processes as a means to increase their already significant market share, said Markus Scherer, Head of Consulting Hong Kong at Ipsos Business Consulting and co-author of the research. Mr Scherer said: " Ipsos Business Consulting research shows why all automotive parts manufacturers in China must act quickly to develop and implement best practices for IP protection to counter the threat from copycats. "China offers strong growth opportunities for auto parts makers, however, these opportunities do not come without risks in a country that is home to the world's largest counterfeit market for auto-parts. Foreign companies have a head start in IP protection processes and may use this to further extend their market share." The largest auto parts manufacturers in the country are Chinese. However, Ipsos Business Consulting research reveals that foreign-invested firms are punching above their weight. While only accounting for one fifth of auto parts enterprises operating in the market, foreign companies generate 33.9 per cent of market output by value. Foreign manufacturers are also more than twice as efficient as their Chinese counterparts in terms of average industrial output. Commenting about the implications for the Thai auto sector, Sanpichit Songpaisan, Country Manager for Ipsos Business Consulting in Thailand noted that there is a potential opportunity for Thai manufacturers. “Thailand can promote itself as a ‘safer’ destination for Foreign Direct Investment from the international manufacturers. This, along with Thailand’s ability to manufacture components that meet global quality standards, should continue to be heavily promoted by the industry and Thai government”, said Ms Songpaisan. Other key findings from the research: Rapid growth in new car sales from 2008-12 will increase supply in the secondary market in the near term. Rising sales for new and used cars will see the aftermarket emerge as the new growth engine for components with OEMs leading production. China's counterfeit auto parts market was valued at CNY 255 billion in 2011. Guangdong, Henan, Zhejiang, Jiangsu and Fujian provinces are considered to be the largest auto parts counterfeiting regions. Beijing has improved IP laws, however, enforcement of trademarks and anti-counterfeiting requires improvement. Anti-forging systems are the most effective means to reduce the risk from counterfeiters. Foreign-invested firms are likely to maintain their strategic advantage over most Chinese manufacturers due to their experience of using mergers and acquisitions as a means of driving growth. A PDF of Ipsos Business Consulting: Trends in China's Automotive Component Manufacturing Industry can be downloaded from this link http://www.ipsosconsulting.com/pdf/Industry-Report-Trends-in-China's-Automotive-Component-Manufacturing-Industry.pdf . For further information, please contact Sanpichit Songpaisan, Thailand Country Manager, Ipsos Business Consulting, +66 2697 0105 (sanpichit.songpaisan@ipsos.com).

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