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 This report presents the activities of Japanese parts suppliers for China in general, Northeast China, North China, Central China, South China, Southwest China, and Taiwan. (Based on news sources over the approximate 15 month period from February 2018 to April 2019)
 * Please refer to the previous report entitled Japanese Suppliers in East China.

 In 2018, automobile production volume in China was 27.81 million units (down 4.2% year-on-year, YoY), and sales volume (factory shipments) was 28.08 million units (down 2.8% YoY), indicating a slowdown in market growth. The main factors for the slowdown include the impact of the U.S.-China trade war and the slump following the last-minute increase in demand at the end of 2017 before the tax incentive policy for small passenger cars was discontinued. In terms of sales by vehicle type, the number of SUVs sold decreased to 9.995 million units (down 2.5% YoY), and the number of sedans and hatchbacks sold decreased to 11.528 million units (down 2.7% YoY). In particular, the decline in sales during the second half of 2018 was severe, falling below the previous year's results in all months from July to December.

 Conversely, the sale volume of new energy vehicles (NEVs) such as EVs and PHVs increased significantly by 61.7% to 1.256 million units. Since January 2018, the Chinese government has implemented the “Vehicle Purchase Tax Exemption Notice for New Energy Vehicles” that exempts NEVs from the vehicle purchase tax. Meanwhile, the vehicle purchase tax rate for passenger cars with a displacement of 1.6L or less has been returned to 10%. In 2019, the NEV credit system was introduced for automakers with an annual production and sales volume of ICE (internal combustion engine) powered vehicles (gasoline vehicles, diesel vehicles, gas fuel vehicles, hybrid vehicles) of more than 30,000 units, which has accelerated the introduction of new NEV models and associated infrastructure.

 Guangdong province is adjacent to the city of Hong Kong and the city of Shenzhen is on the cutting-edge of IT and the origin of the transformation spreading throughout the auto industry in China. Shenzhen is home to the headquarters of BYD, the largest EV manufacturer in China, which is engaged in expanding its EV joint venture operations with Daimler. In addition, the city of Wuhan in Hunan province is located in the Yangtze River basin, so it has long been a transportation hub for the munitions industry and heavy industry. As for the automotive industry, Wuhan is also where the headquarters of the Dongfeng Motor Group is located. In the North China region, there are the headquarters of the Beijing Automobile Group, where EV sales are strong, and the headquarters of Great Wall Motor, which will produce the MINI brand in the future. Many Japanese suppliers have already followed the Japanese OEMs to supply products to their joint venture assembly plants in Tianjin (FAW Toyota), Wuhan (Dongfeng Honda), and Guangzhou (Guangqi Toyota, GAC Honda, and Dongfeng Nissan). However, Japanese suppliers are strengthening their production systems due to the increase in the introduction of NEV models to market and to meet the increasing number of orders from Chinese automakers.

 In 2020, Toyota will launch the IZOA (FAW Toyota) and C-HR (GAC Toyota) EVs, which were announced at the Shanghai Motor Show. To meet the increase in demand for NEVs, Toyota will expand its Guangzhou plant, which is targeted to start operations in 2022. Honda will manufacture its second China-exclusive EV at its Wuhan plant, with plans to release the model in the second half of 2019.
 NEV-related activities by Japanese suppliers include Panasonic's start of production of prismatic lithium-ion batteries, Nidec's new E-Axle plant, and UACJ's new plant for aluminum materials used in lithium-ion batteries. Activities related to the expansion of customers include Aisin AW establishing a new manufacturing site for automatic transmissions, JTEKT increasing its production capacity of electric power steering (EPS), KYB's new EPS plant, and an increase in the production capacity of pressed parts by suppliers such as H-One, Topre, and G-TEKT. Furthermore, suppliers such as Keihin, Hitachi Automotive Systems, and Mitsubishi Electric are considering new production systems to supply products for electric vehicles.

Japanese supplier activities in China (*Introduction of new products):

Related reports:
Japanese Suppliers in East China: Responding to NEV market expansion (May 2019)
2019 Sales Forecast in China (CAAM): NEVs to make up 1.6 million of 28.1 million vehicles sold (Apr. 2019)
2018 China market: 28.081M units for new car sales, 23.71M units for passenger cars (Feb. 2019)

＜Japanese Supplier Reports＞
  Japanese suppliers in Central and Eastern Europe: Responding to orders from European OEMs (Jun. 2019)
  Japanese suppliers in Western Europe: Meeting increasing demands for electrification and others (May 2019)
  Japanese suppliers in India: Meeting tighter emissions and fuel economy regulations (Nov. 2018)
  Japanese Suppliers in Mexico: Focusing on Changes to NAFTA (Oct. 2018) 
  Japanese suppliers in the U.S. and Canada: Strengthening of operations (Sep. 2018) 
  Japanese parts suppliers in ASEAN: Responding to the increase in global market demand (Aug. 2018)