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In this issue:

• A Look under the Hood: Overview of China’s Auto Parts Industry
• Gearing Up: Investing in China’s Automotive Parts Industry
• Expert Commentary: Opportunities in New Energy Vehicles

These are exciting times for the automotive industry in China. The country recently overtook the United States to become the world’s largest car market and shows no signs of slowing down. As more and more Chinese enter the middle class, their demands for mobility increase. As a result, car use in China has exploded.

In its wake we find the industry that makes the wheels spin: the automotive parts industry. Attracted by the rapid demand for cars, thousands of automotive parts companies have sprung up across China, resulting in the highly fragmented sector we find today. Up until recently, car makers were able to exert pressure on parts manufacturers, drawing the attention of China’s anti-trust regulators. Following a host of harsh fines and penalties meted out to the major car makers, auto parts manufacturers are now able to sell directly to repair shops and consumers – a move that enhances their price setting capability.

In this issue of China Briefing, we present a roadmap for investing in China’s automotive industry. We begin by providing an overview of the industry, and then take a comprehensive look at key foreign investment considerations, including investment restrictions, tax incentives and manufacturing requirements. Finally, we discuss foreign investment opportunities in a part of the industry that receives substantial government support: new energy vehicles. With our specialized knowledge and experience in China’s automotive industry, Dezan Shira & Associates can help foreign companies either establish or expand their operations in China and beyond.