As China's vehicle parc rises, sales of aftermarket products are rising faster than in other global markets; to stay in the lead Bosch is investing EUR120 million (CNY1.1 billion) in a new production plant.
IHS Global Insight Perspective | |
Significance | Bosch is investing CNY1.1 billion (EUR120 million) to build its largest global aftermarket plant located in China which is the fastest growing market for the division. |
Implications | Bosch will combine three business units together with R&D centres to create a new global aftermarket production hub in Nanjing, in China's Jiangsu province. |
Outlook | Bosch is seeing growing sales in its aftermarket with annual sales to top CNY2 billion from the single plant by 2014. IHS Automotive spoke with Ken Ford, Regional President, Automotive Aftermarket Asia Pacific about China's role in Bosch's global aftermarket strategy. |
China is the fastest growing market for Bosch's aftermarket products as the number of vehicles on China's roads continues to rise demand for aftermarket products such as brake pads is rising faster than market growth. Bosch has begun construction today of a new CNY1.1-billion (EUR120-million) facility in Nanjing, the capital city of China's eastern Jiangsu province. The plant will bring in sales revenue of CNY2 billion annually when full production is achieved in 2014, says Markus Bube, general manager, Bosch Automotive Products Nanjing speaking at the ground-breaking ceremony for the new plant.
IHS Automotive spoke to Bube and Ken Ford, Asia Pacific regional president of Bosch's Automotive Aftermarket division about China's role in the company's global strategy for the aftermarket division.
The new Bosch Automotive Products Nanjing plant will encompass 1,000 square metres of building facilities and will combine three different business units including for the production of spark plugs, brake pads and diagnostic equipment. The products will be tailor-made for Asia Pacific and China as the plant will include R&D and product development centres. The plant will also be an export hub for Bosch's other global aftermarkets. The new plant is the largest global aftermarket plant for Bosch. By 2014 the plant will employ 3000 staff and produce over 100 million spark plugs, 80 million brake pads and 25,000 diagnostics annually. "Nanjing will support the very fast growing sales of the aftermarket in China," says Ford.
The Nanjing plant has begun construction today (6 September) and construction will be complete by March 2012, Bube said, adding that production will start in 2012. By then the plant will produce 125 million spark plugs annually, making this Bosch's largest spark plug plant. The plant will combine three different Bosch units for the first time, he said, including diagnostic equipments, spark plugs and brake components including brake pads. It will also be a development centre for new Bosch aftermarket products.
IHS: Will China become Bosch's largest market for aftermarket products?
Ken Ford: With the growth of vehicles in China in the next ten years China's aftermarket will be one of the largest in the world. China is already the fastest growing aftermarket. In some years China may not overtake the US, our biggest aftermarket, but China will become the second largest market for aftermarket products.
IHS: Will the plant only supply China or globally?
Ford: Yes we will be for sure supplying a lot of products for China but Nanjing will also be important for the Asia Pacific region and for the global market.
IHS: Counterfeiting is a big problem for many aftermarket product manufacturers—does this affect Bosch?
Ford: We already are very active on the IPR [intellectual property rights] situation with teams in India and China working daily and with raids taking place regularly. We also work closely with the automotive industry to show the dangers of counterfeited products. We prosecute quite heavily.
IHS: With Bosch's recent announcement of the acquisition of Unipoint Group—will this now fall under the aftermarket division?
Ford: We have announced our intention to acquire Unipoint Group and they will become part of Bosch Aftermarket. Unipoint has its headquarters in Taipei (Taiwan) and a plant in Shenzhen (Guangdong province) that makes wiper units—different business units which we plan to develop. But main engineering processes will be done in Nanjing.
Outlook and Implications
Bosch is already a very strong player as a tier-one supplier to automakers in China. The aftermarket is a fast growth market for Bosch and as the number of vehicles in China grows, demand for aftermarket products is increasing faster there than in any other global market.
Bosch currently uses two methods to sell its aftermarket products in China, via contracts with automotive 4S stores where OEMs service cars under their warranty packages thereby using Bosch products, and via independent aftermarket dealers. A growing problem, however, is the presence of counterfeit products mainly in Asia-Pacific markets such as China and India which steal market share from original product manufacturers. Ford declined to give an estimate of lost revenue in relation to counterfeit products, but he did acknowledge the problem and said that Bosch has a no-tolerance policy in relation to IPR infringement.
As China's car parc continues to grow, the aftermarket will become an important sector for growth for suppliers of volume products such as brake pads, wipers and spark plugs. IHS Automotive data shows that China's car parc stood at 42.79 million in 2010 and will rise to 114.59 million in 2015. Bosch will further strengthen its product portfolio with wipers and other aftermarket products currently produced by Unipont, which will see Bosch gain control of a larger segment of the aftermarket in China (see Taiwan: 12 August 2011: Bosch Signs Purchase Agreement with Taiwan's Unipoint). The transaction remains subject to regulatory approval, and the two companies have agreed not to disclose the purchase price. Bosch's aim is to further strengthen its position as the leading supplier of starters, alternators and wiper blades in the Automotive aftermarket.
Bosch is currently expanding facilities across China (see China: 24 March 2011: Bosch to Double Chinese Workforce to 50,000 by 2015). It will open an all-weather test track in Donghai in Jiangsu province in 2012, in addition to its existing winter test track in China's remote Inner Mongolia.
Bosch has also been building its presence in other markets in the Asia-Pacific region, but China continues to see large investments as it is the supplier's fastest growing market with investments this year topping CNY3.4 billion across different divisions (see China: 22 April 2011: Bosch Opens New CNY980-Mil. Chinese HQ in Shanghai, Plans to Invest CNY3.4 Bil. in Expansion This Year). In 2010, the Bosch Automotive Aftermarket division achieved sales of around EUR4.1 billion (USD5.8 billion) and employed over 10,000 associates worldwide.