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Transitional 2013 paves way for mainland auto accessories growth

Despite trading figures for 2013 being 12% down on those of the previous year, many of the exhibitors at the 18th China International Expo for Auto Electronics, Accessories, Tuning and Car Care Products remain upbeat.

Photo: Auto accessories: new tech driving new growth.
Auto accessories: new tech driving new growth.

After a number of years of continuous growth, China's auto accessories market suffered something of a decline in 2013. Overall, sales dropped to Rmb502.5 billion, down 12% year-on-year when compared to 2012 figures (Rmb566 billion).

Despite this, many in the industry remain surprisingly upbeat. There is a feeling that 2013 was something of a transitional year, with a number of products making their market debut, putting in place a range of business opportunities that will mature over the next two years.

It was this mood of mixed apprehension and anticipation that characterised Beijing's 18th China International Expo for Auto Electronics, Accessories, Tuning and Car Care Products (CIAACE). Widely seen as the most influential annual event for the mainland auto accessories sector, this year's show featured more than 200,000 products.

This year the products were divided across seven categories – auto accessories, auto electronics, explosion-proof heat-insulating films, car decorations, car beauty, car care, and auto tuning. For many, the range of items on show provided a clear indication as to the future directions of the industry. Tellingly, energy saving and environmentally-friendly products were widely available, as were those with high levels of technical innovation.

Hi-tech takes auto accessory lead

In-car data recorders most definitely fell into the innovation category. These units, offering failure diagnosis, recording and wireless transmission, only appeared on the mainland a little over three years ago, but have already established a definite niche for themselves. Their appeal lies partly in their facility to free drivers from having to visit repairs shops to have their mechanical problems identified.

Using the system, problems can be diagnosed remotely, with information fed through smartphones or the cloud. As in-car driving data recorder technology has matured, prices have dropped significantly. In a sign of the system's popularity, 100 different models from 10 separate manufacturers were available at the event.

A further spur to uptake has been the growing problem of attributing blame in road traffic accident situations. With such incidents on the increase, in-car data recorders are seen as a prime way of drivers proving their innocence in the case of any dispute. It is believed that legislation is to be introduced that will regulate the use of such systems and provide a framework for their legal standing.

One particularly popular data recorder came courtesy of a Shenzhen electronics manufacturer. The unit offers wide-angle high-definition recording, but also has an infra-red facility for nocturnal use. Following any collision, the recorder automatically "locks", ensuring the integrity of the stored data.

Thanks to state-of-the-art manufacturing techniques and the use of tiny integrated circuits, the unit is extremely compact, although its processing speed remains impressive. Its strongest appeal to purchasers, however, is undoubtedly its extremely reasonable Rmb500 price tag.

Another new innovation to find a ready market was thermal insulation liquid car window film. Unlike conventional heat insulation films, which have to be stuck on to car windows, this liquid alternative can be simply sprayed on. It is tipped by many to quickly become the norm in this particular product category.

Photos: In-car data recorders: tackling diagnostics and disputes.
In-car data recorders: tackling diagnostics and disputes.

More conventional film products were also on offer at the expo, with some still exciting interest among buyers. The launch of the ClearPlex windshield protection film, for instance, majored on the fact that it can be applied inside – rather than outside – the car, an element said to provide enhanced driving safety.

More for external application was RestorFX, a paint finish for vehicles manufactured using proprietary Canadian technology. Repeated applications are said to give the car body an "as new" look and maintain it in a pristine condition.

Overall, the arrival of many of these new and high-end technologies was seen as providing a shot-in-the-arm for the auto accessories industry across all trading platforms, including high street and online. There are particularly high hopes that auto information management and intelligent management software will prove major growth areas across the mainland.

Online and high street channels

With the mainland's number of private cars still on the increase, so too are the number of prospective outlets for automotive accessories. Department stores are set to provide a new battle ground, with many distributors/manufacturers keen to establish dedicated sales areas within them.

While online shopping, in general, is becoming increasingly popular, in the auto accessories sector some consumers still have a distinct preference for the more traditional channels. This allows them to 'touch' the products prior to purchase, proving a greater feeling of security and confidence.

With the sale of auto accessories now expanding into the department store supermarket environments, this offers a fast-track means of boosting distribution and building brand awareness. This increased offline uptake, however, is likely to be mitigated by March 2014 legislation relating to greater transparency regarding the return of goods bought online. It is believed that this legislation will boost e-tail purchases in line with greater customer reassurance.

In light of the continuing significance of e-tailing for the auto accessories sector, one of the most well-attended seminars at the event focused exclusively on this channel. The seminar attracted a number of the key online players, including Tmall.com, Amazon.cn, Taobao.com, JD.com and Suning.com.

With regard to more conventional sales routes, a number of leading department store supermarket operators – including Beijing's Huaguan, Henan's Dazhang, Qingdao's Liqun Department Store, Zhengzhou's Dennis and the Weifang Group of Shandong – all attended the expo. Their combined presence represented a bid to establish central buying arrangements with the 6,000-plus exhibitors.

Some 20 sizeable 4S stores (those specialising in "Sales, Spare parts, Service and Surveys" – the later with regard to customer feedback) from Shandong, Jiangsu, Fujian, Inner Mongolia, Henan and Hebei were also in attendance at the expo. The group made substantial purchases from a number of exhibitors with regard to a wide range of upmarket products, notably auto electronics, car seats, car floor mats, auto care and maintenance products, premium goods and auto tuning accessories. In total, deals worth more than Rmb100 are believed to have been agreed.

As well as domestic companies, a number of high-spending international buyers from the US, France, Korea (among others) also attended the expo. According to the event organisers, the overseas buyers purchased a considerable amount of stock.

Tuning accessories sales to soar in first-tier cities

Aside from the seminars and products launches, the other major draw of the 2014 event was the publication of a government white paper addressing the future development of the mainland auto accessory market. This officially deemed the market to have "come of age" in 2013, with any industry fluctuations said to have occurred within acceptable parameters.

With the overall economy slowing down, there was an understandable knock-on effect witnessed in the accessories sector, though this is believed to be more of a blip than a long-term decline. While the industry is unlikely to again enjoy its pre-2013 rates of growth, a more modest increase is predicted for coming years.

For 2014, it is expected that the sales volume will remain level with 2013 or even shrink slightly. This will be followed by moderate growth – in the region of 10% – in the 2015-2016 period.

By 2016, it is estimated that the auto accessories market will be worth some Rmb630 billion. The government report also indicates that, while the eastern, southern and northern regions of China will continue to be key auto accessories centres, the southwestern region will emerge as a significant force in 2015.

While, overall, it is expected that the 2014 volume of trade in the sector will match that of the preceding 12 months, it is likely that there will be considerable variance within certain sub-sectors. More specifically, it is believed that sales of auto electronics will remain constant; auto internal and external decoration products will drop by 7%; auto care and maintenance products will enjoy a slight growth of around 5%, with demand for solar film products remaining roughly the same. Brighter prospects, though, are predicted for auto tuning products, particularly in tier one cities, where demand is expected to grow by 30%.

Photo: Impressive body work: RestorFX paint finish.
Impressive body work: RestorFX paint finish.

The 18th China International Expo for Auto Electronics, Accessories, Tuning and Car Care Products (CIAACE 2014), took place at the New China International Exhibition Center (NCIEC) between 20-23 February, 2014.

Xu Lin, Special Correspondent, Beijing

Content provided by Picture: HKTDC Research
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