12 Oct 2016
Auto Parts & Accessories Industry in Hong Kong
Hong Kong exports a large variety of auto parts and accessories. A variety of automotive electronics and electrical items are among the largest export categories, given the strong position of Hong Kong as an exporter of a wide range of electronic products.
Although Hong Kong is not an automotive manufacturing centre, many Hong Kong companies have been engaged in the auto parts business for a number of years. In fact, several of them are tier-1 or tier-2 suppliers to leading automotive makers in the US, Europe and Japan.
Amid concerns about environmental protection and rising prices for conventional energy, most automotive industry players are focussing on energy-saving and new energy vehicles in terms of future business development. This is expected to provide a boon to the related auto parts businesses, especially those engaged in the production of electronic and electrical items.
Hong Kong exports a large variety of auto parts and accessories, with re-exports being the major business. A variety of automotive electronics and electrical items are among the largest export categories, a reflection of Hong Kong’s strong position as an exporter of a wide range of electronic products. Hong Kong also exports certain direct parts and accessories for motor vehicles and motorcycles, including pneumatic tyres, safety glass, rear-view mirrors, locks, car seats, car batteries, electrical lighting, alarms, navigational equipment, wiring sets, counters and meters, exhaust systems.
Although Hong Kong is not an automotive manufacturing centre, many Hong Kong companies have been engaged in the auto parts business for many years, and have achieved a certain standing within the industry. Apart from those engaging in trading and manufacturing for the aftermarket, a number of auto parts companies in the territory are suppliers to the leading automotive manufacturers in the US, Europe and Japan. A number are also recognised as tier-1 or tier-2 suppliers to automotive companies.
Johnson Electric, for instance, is an industry leader in the micro motors, motors and motion solutions sector. Its automotive products include engine cooling fan modules, air-conditioning actuators, automotive window lift drives and sunroof drives, headlamp actuators, door locks, power transmission systems, braking systems and steering and suspension systems.
Another Hong Kong company, Surface Mount Technology (Holdings) Ltd, specialises in electronic manufacturing services (EMS). Among its other activities, it provides manufacturing services related to car audio, car body electronics and auto information systems to its partners in China, Europe, North America, Japan, etc.
Varitronix is a leading manufacturer of small- to medium-sized liquid crystal displays (LCD) for use in the automotive sector, as well as in a number of others. The company offers complete display solutions for automotive, industrial and other product applications. Its LCD products (for automotive use) include GPS navigation, climate controls, speedometers, car audio, dashboards, clocks, gear indicators, and TVs. These are mainly supplied to Europe, China and Korea.
Many Hong Kong auto parts companies have strengthened their quality assurance and environmental management systems, and have secured ISO 9000 certification (an internationally recognised standard for quality management systems) for their operation systems, as well as ISO 14000 (a global standard for environmental management systems).
To comply with the stringent quality requirements of the automotive industry, while meeting corporate social responsibility criteria, a number of Hong Kong companies have obtained further certifications for their operation systems, including ISO/TS 16949, the German VDA 6.1 and the Italian AVSQ. All of these are internationally recognised quality management standards specific to automotive industry. A number have also secured OHSAS 18001, an international standard for occupational health and safety management systems.
Export Performance of Hong Kong’s Auto Parts and Accessories Industry^
Hong Kong exports a great variety of auto parts and accessories, covering many different industrial sectors, ranging from electrical appliances and electronics to metal and plastic parts or mechanical components. Certain products may have been exported under different categories, such as electronic products, mechanical or plastic parts. But the relevant trade statistics do not have detailed breakdowns for particular items exclusively used in automotive vehicles. The above tables present trade statistics (under HS classifications) of those products that have been identified for vehicles or related uses in order to avoid misrepresentation. The figures, however, may also include a small number of products that are not for use in vehicles. This is due to the aggregation of some HS codes.
Most manufacturers produce on an OEM basis either directly for automotive makers or for tier-1 or tier-2 suppliers. Some large manufacturers of accessories also pro¬duce under their own brand names and designs. These are then exported either through exporters, agents or directly to overseas importers who buy in bulk and distribute to car dealers, service stations and auto parts stores. Those major aftermarket chain-store retailers of sufficient size may also import directly from manufacturers.
Participation in international trade fairs and exhibitions will not only help Hong Kong companies to stay abreast of the latest technologies and product trends, but will also enable them to meet with potential business partners and overseas manufacturers. The relevant major international trade fairs include the AAPEX-Automotive Aftermarket Products Expo in Las Vegas and the Automechanika in Frankfurt. From time-to-time, the HKTDC also organises business missions for Hong Kong manufacturers, targeting specific markets and looking to establish new business relations.
The automotive supply chains usually follow the just-in-time operation mode. This means many of the major players in the global automotive industry have shifted production closer to their targeted markets to reduce logistics costs, while gaining better access to the targeted markets. This trend has encouraged auto parts suppliers to follow suit. As many Asian countries consider the development of the auto industry to be one of the major pillars of their economic growth, those auto parts suppliers with a presence in the region will gain a definite advantage. An increasing number of foreign automotive makers, for instance, have formed joint ventures on the Chinese mainland.
With growing pressure on cost and quality, the automotive industry has increasingly adopted advanced information technology in design and manufacturing. Computer-aided design has become a popular tool in many industries, and is becoming mature with regard to automotive geometric design. Computer-aided manufacturing, which is largely related to numerical control machining, and rapid prototyping (or 3D printing technology in today’s terminology) are also being adopted.
Since the January 2006 implementation of the second supplement to the Closer Economic Partnership Arrangement (CEPA) between the mainland and Hong Kong, all products of Hong Kong origin, including those related to auto parts, can be imported into the mainland at zero tariffs. Detailed information, as well as the origin rules for Hong Kong products, is available from the following hyperlink:
General Trade Measures Affecting the Exports of Auto Parts and Accessories
Initiation of anti-dumping proceedings in certain countries/economies against goods originating from the Chinese mainland has been of concern to those Hong Kong companies with production facilities across the border. Brazil, for example, currently imposes anti-dumping duties against imports of certain kinds of tyres used for buses, lorries or motorcars, as well as motorcycle rubber tyres originating from the mainland. The US, meanwhile, has imposed anti-dumping duties against imports of certain new pneumatic off-the-road tyres originating from the mainland.
Consumers in developed economies have helped shape the industry’s development, as they are becoming more concerned about passenger safety, driving performance and environmental-friendliness. The world - including China and other developing countries - is becoming more concerned about urban pollution and is now paying greater attention to reducing air pollution and raising fuel efficiency. Due to growing concerns about high prices for conventional energy, most automotive industry players are focussing on energy-saving and new energy vehicles as part of their future business development.
In Japan, for instance, the Honda Group is now one of the leaders in the development of energy-saving and eco-friendly hybrid power systems, while Nissan is seemingly placing greater emphasis on the development of purely electric cars. As to Chinese players, the Shenzhen BYD Group is seizing the opportunity to sell purely electric cars, which are becoming popular in the mainland market, while at the same time embarking on the development of hybrid sedans and purely electric passenger vehicles. All of these developments are expected to boost technological advancement in the areas of electronic and electrical control systems, and should prove a boon to the auto parts businesses related to electronic and electrical systems.
At the same time, there is an increasing trend in the automotive sector towards using more electronic devices, including those relating to engine controls and safety systems. Navigation items, such as GPS apparatus, and in-car audio-visual entertainment systems with connectivity with mobile devices are increasingly listed among the standard specifications of automotive vehicles. Some electronics players are developing a range of in-car display devices with interactive features, a reflection of advances in mobile and Internet technology. As these devices are increasingly presented as built-in features in new cars, related auto parts manufacturers have responded by shifting their targets from end-users in the aftermarket to automotive makers. This is in a concerted effort to become suppliers to the major automotive makers.