The automotive parts remanufacturing industry is poised for large-scale growth.
Release Date:
2019-09-23
With China having been the world’s largest producer and seller of automobiles for many consecutive years, coupled with a rapid increase in the vehicle parc and an accelerating rate of vehicle replacement, a substantial number of retired vehicles have provided abundant resources for the remanufacturing industry of automotive parts. The issuance of relevant standards and policies indicates that China’s automotive parts remanufacturing sector has entered a stage of standardized development, heralding a period of large-scale promotion and expansion for the industry.
In mid-December 2014, the National Standardization Administration Commission issued the “Quality Inspection Methods for Remanufactured Blanks” and the “Quality Management Requirements for Remanufactured Machinery Products.” At the same time, the National Development and Reform Commission, in conjunction with the Ministry of Industry and Information Technology and two other ministries, publicly announced a list of 10 enterprises qualified as pilot entities for promoting remanufactured products, along with the specific models of such products and their promotional prices. Concurrently, the NDRC, the MIIT, the Ministry of Finance, and several other relevant ministries jointly launched a nationwide “trade-in-for-remanufactured” campaign for remanufactured products. Under the terms of the campaign, eligible remanufactured automotive engines, transmissions, and other components are eligible for subsidies equal to 10% of the trade-in value.
In late December 2014, the General Office of the Ministry of Industry and Information Technology issued the “Notice on Further Improving Pilot and Demonstration Work for the Remanufacturing of Mechanical and Electrical Products,” requiring industrial and information technology authorities at all levels, in coordination with relevant departments, to strengthen regulation of the mechanical and electrical product remanufacturing industry, encourage local remanufacturing enterprises and their products to be publicly listed and promoted online in a centralized manner, and urge relevant entities to strictly comply with national industrial policies, laws and regulations, and technical standards. The notice also directs enterprises to implement labeling requirements for remanufactured products and guides remanufacturing firms in establishing information-based management platforms for remanufactured products, thereby enabling product “tracking” and the “traceability” of used parts.
The Notice clarifies that all regions are encouraged to leverage funding channels such as energy conservation and emission reduction programs to support projects involving the technological upgrading and transformation of remanufacturing, thereby accelerating the industrialization of remanufacturing. Greater support will be provided to enterprises and products listed in the Catalog of Remanufactured Products, a platform for matching supply and demand for remanufactured products will be established, and efforts will be coordinated to encourage government agencies, enterprises, public institutions, and other organizations to give priority to purchasing remanufactured products. In addition, promotional events for remanufactured products will be organized to raise public awareness of remanufacturing technologies for mechanical and electrical equipment, thereby stimulating and encouraging broad consumer adoption of remanufactured goods. Regions that meet the relevant conditions should actively promote the application of the value-added tax exemption policy for comprehensively utilized resources to remanufactured products and vigorously support the implementation of subsidy policies for “trade-in” programs involving remanufactured products.
Xie Jianjun, Secretary-General of the Remanufacturing Branch of the China Association of Automobile Manufacturers, stated that a series of favorable developments indicate that China’s automotive parts remanufacturing industry has entered a stage of standardized development, which will accelerate the rapid growth of the sector.
Vast market potential
In recent years, China’s automotive industry has maintained an average annual growth rate of over 10%. It is estimated that by 2016 the country’s stock of civilian automobiles will reach 200 million units. Based on the established ratio between vehicle ownership and the development of the remanufacturing industry in developed countries, China’s automotive parts remanufacturing sector is poised for robust market growth.
According to available information, remanufactured products account for as much as 50% of the automotive repair and parts markets in Europe and North America. Given this market share, China’s future automotive aftermarket holds enormous potential for remanufactured products.
Xie Jianjun stated that, although China’s automotive parts remanufacturing industry started relatively late, it has experienced rapid development. The number of enterprises engaged in remanufacturing has grown from just one at the outset to more than 100 today, with output value increasing from less than RMB 50 million in 2005 to RMB 8 billion currently. Meanwhile, the workforce has expanded from fewer than 1,000 to over 50,000, reflecting significant growth in both the scale of the industry and its output value.
Compared with traditional methods of scrap metal recycling and disposal, the remanufacturing of automotive parts can recover approximately 70% of the value embedded in end-of-life products; compared with original manufacturing, remanufacturing reduces energy consumption by 80%, cuts material usage by more than 70%, and lowers manufacturing costs by 30% to 50%.
According to available information, internal-combustion-engine remanufacturing is one of the key areas in the remanufacturing of automotive components. Not only does it significantly reduce waste and deliver substantial environmental benefits, but it also saves energy and materials, yielding notable economic and social advantages. Data show that many critical components of end-of-life internal-combustion engines—such as cylinder blocks and crankshafts—suffer from localized failures. Through remanufacturing processes like forming and repair, these components can have their dimensions, precision, and performance restored without altering their original geometry or material properties.
Xing Min, Executive Vice President and Secretary-General of the China Internal Combustion Engine Industry Association, stated that the internal combustion engine industry is a vital foundational sector in China, characterized by a long industrial chain, high interconnectivity, broad employment opportunities, and strong consumer-driven demand. Implementing remanufacturing of internal combustion engines not only enables the resourceful utilization of large quantities of end-of-life products but also helps foster new drivers of economic growth, thereby accelerating the development of a circular economy and the building of a resource-conserving, environmentally friendly society.
Group-based agglomeration development
Industry experts believe that clustered development will become the prevailing trend in China’s auto parts remanufacturing sector. Supported by established industrial technologies, collaborative clustering in this sector facilitates specialized recycling, disassembly, cleaning, remanufacturing, and the establishment of shared infrastructure platforms, thereby fostering a complete industry value chain.
Xie Jianjun stated, “The National Development and Reform Commission, in collaboration with relevant ministries and commissions, is advancing the establishment of demonstration bases for the remanufacturing industry. Furthermore, the State Council’s Strategy for the Development of a Circular Economy and its Short-Term Action Plan both call for the planned centralized development of 5 to 10 demonstration bases for the remanufacturing of auto parts.”
According to available information, China proposed the establishment of a remanufacturing system in the late 1990s. In 1998, Jinan Fuqiang Power Co., Ltd., a subsidiary of China National Heavy Duty Truck Group, was founded, becoming the country’s first enterprise dedicated to internal-combustion-engine remanufacturing. Over the subsequent decade and more, China’s automotive-parts remanufacturing industry gradually developed and expanded into a sizable sector.
“The achievements of China’s parts remanufacturing industry are evident to all, yet as an emerging sector, remanufacturing still faces numerous challenges,” said Xie Jianjun. “For instance, remanufactured products have not yet gained widespread consumer acceptance; the sourcing of used components and the distribution channels for remanufactured goods remain inadequate; technological and management standards are relatively low, leading to inconsistent product quality; relevant regulations on the recycling and management of end-of-life vehicles urgently need to be revised; supporting management systems must be further refined; and technical standards remain incomplete.”
How can China’s automotive parts remanufacturing industry be accelerated? Xie Jianjun believes that, first and foremost, a standardized and efficient reverse logistics system should be established as soon as possible. Due to the lack of standardized and well-functioning channels for collecting used products, many end-of-life items are simply treated as waste, making it difficult to ensure a sufficient supply of used components returning to remanufacturing enterprises. As a result, remanufacturing production lines often operate at idle or underutilized capacity.
Secondly, it is essential to strengthen awareness of the remanufacturing industry chain. Under the overarching “trade-in for remanufactured” framework, automotive parts remanufacturing enterprises must establish a robust product traceability and tracking system to thoroughly map out product usage patterns, service life cycles, and end-of-life dates. In conjunction with a reverse logistics system, they should maintain ongoing product replacement relationships with customers.
Third, automotive parts remanufacturing enterprises should collaborate and advance together. As China’s automotive parts remanufacturing industry is still in its infancy, it is essential for these enterprises to engage in mutual exchange and support, working jointly to foster development.
Industry insiders say that relevant government departments should adopt a range of measures to strengthen regulatory oversight, rigorously enforce quality inspections for remanufactured automotive parts, leverage policy initiatives to shape consumer attitudes, and intensify public awareness campaigns so that more consumers become informed about and willing to use remanufactured automotive components.
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