In 2016, the global automotive parts industry landscape was in constant flux. Automotive parts companies actively transformed and upgraded, responding to new technological changes and seizing new development opportunities. This report, using ten major news stories and annual reports on engines, automotive electronics, and new energy vehicle parts, strives to present a comprehensive overview of the development of the automotive parts industry in 2016.

　　1. Automotive Parts Included in Recall System

　　On January 1, 2016, the "Implementation Measures for the Regulations on the Recall of Defective Automotive Products" officially came into effect. Compared to the repealed "Regulations on the Recall of Defective Automotive Products" (March 2004), its biggest highlight is the further clarification of the obligations of automotive product manufacturers as the main body of the recall, and the addition of obligations for automotive parts manufacturers. The responsibilities of parts companies are detailed in three aspects: information management, defect investigation, and legal liability. This is the first time China has included parts manufacturers in the automotive recall system.

　　2. Difficulty in Implementing Anti-Monopoly Policies for Parts

　　In March 2016, the National Development and Reform Commission (NDRC) released the "Draft Anti-Monopoly Guidelines for the Automotive Industry." Since February 2014, anti-monopoly policies for auto parts have been frequently issued, and reforms have been successively launched. However, investigations show that from 4S stores, parts dealers, repair shops to consumers, China's anti-monopoly policies for auto parts are currently still in the stage of establishing the superstructure. The lower levels do not understand the policies and have not clearly felt the benefits brought by the policies. Monopoly in parts channels and prices still exists. There is still a long way to go to truly achieve anti-monopoly in auto parts.

　　3. Single Champion Program Supports the Development of Parts Enterprises

　　On April 1, 2016, the Ministry of Industry and Information Technology (MIIT) released the "Implementation Plan for the Special Action to Cultivate and Upgrade Manufacturing Single Champion Enterprises," indicating that by 2025, 200 manufacturing single champion demonstration enterprises will be summarized and upgraded, consolidating and enhancing the global market position of enterprises, further improving technological levels, and continuously improving business performance. On November 24, the MIIT's Department of Industrial Policy announced the first batch of selected manufacturing single champion demonstration (cultivation) enterprises. Four parts companies—Zhongding Holdings, Shaanxi Fast, Wanxiang Qianchao, and CITIC Dicast—were successfully selected as single champion demonstration enterprises, and will play a demonstration and leading role in the transformation and upgrading of automotive parts enterprises.

　　4. Significant Increase in Overseas Acquisitions of Auto Parts

　　2016 was a year of significant overseas mergers and acquisitions for parts companies. In February, Joyson Electronics acquired the automotive business of US-based Key Safety Systems and Germany's TS Tech for US\$1.1 billion, entering the automotive active and passive safety market; in March, Yin Yi Real Estate Co., Ltd. purchased 100% of the equity of Ningbo Haosheng held by Tibet Yin Yi, a wholly-owned subsidiary of its controlling shareholder Ningbo Yin Yi Holdings Co., Ltd., indirectly holding related assets of ARC, a global gas generator company; in September, Tianjin Tianhai Synchronous Group's Hubei Taitai Electromechanical Co., Ltd. acquired 100% of the equity of Netherlands-based e-Traction Europe B.V., planning to put in-wheel motors into production in 2017.

　　5. Recyclability of "Five Major Assemblies" of Scrapped Vehicles; Dawn for Remanufacturing of Parts

　　On September 19, 2016, the State Council's Legislative Affairs Office released the "Decision of the State Council on Amending the Regulations on the Recycling of Scrapped Vehicles (Draft for Comments)." The draft stipulates that the "five major assemblies" can be sold to steel enterprises as smelting raw materials, or sold to parts remanufacturing enterprises according to the relevant regulations formulated by the State Council's competent department for scrapped vehicle recycling, in conjunction with the State Council's comprehensive management department for circular economy development. This policy adjustment has broadened the sources of used parts for remanufactured parts, clearing up the long-standing "intestinal obstruction" in the parts remanufacturing industry.

　　6. Consumer Electronics Entering the Automotive Electronics Field

　　With the development of automotive electronics, more and more consumer electronics are entering the automotive electronics field, bringing new changes to the automotive electronics field. On October 27, Qualcomm and NXP Semiconductors reached an agreement for Qualcomm to acquire NXP for US\$47 billion. NXP is currently the world's largest automotive chip supplier, and Qualcomm's acquisition of NXP is mainly aimed at expanding into the automotive chip market. On November 14, Samsung Electronics signed an agreement with Harman International Industries to acquire Harman for US\$8 billion, filling Samsung's gap in its automotive strategy and laying out the smart car market. Through this, Samsung will become a major player in the automotive technology field.

　　7. Breakthrough in Domestically Produced Transmissions

　　In 2016, numerous cases showed that domestically produced transmissions have made breakthroughs, resulting in widespread development. On March 22, Changan Automobile Group Co., Ltd.'s Chongqing Qingshan Transmission Branch Company released an international bidding announcement for the DCT (dual-clutch automatic transmission) box mechanical processing production line. This DCT officially went into batch production in July 2016. In August, Changan announced that the DCT used in its CS15 DCT version model is the first wet DCT transmission launched by Changan's UK R\&D center. In terms of CVTs, the CVT produced by Hunan Jianglu Rongda Vehicle Transmission Co., Ltd. will be matched with a strategic model of a domestic micro-vehicle company, and the new car is expected to be launched next year. At the same time, domestic brands have already gained an advantage in the market for automatic transmissions for new energy buses and pure electric buses.

　　8. Diesel Engine Market Rebounds from Bottom

　　Data from the China Association of Automobile Manufacturers shows that from January to November this year, the cumulative sales of vehicle diesel engines reached 2.5784 million units, a year-on-year increase of 10.02%. Weichai, Yunnei Power, Anhui Jianghuai, and other diesel engine companies have also reversed the downturn of previous years, achieving impressive sales results. Since this year, the domestic diesel engine market has ended five consecutive years of decline and begun to grow, influenced by the improvement of the coal market and the national policy of limiting height and load. Industry insiders believe that the vehicle diesel engine market has bottomed out, but will not rebound significantly; steady growth will be the main theme in the next few years.

　　9. Domestic High-Pressure Common Rail System Makes Breakthrough

　　Since this year, with the upgrading of diesel vehicle emissions and the implementation of the T3 emission standards for non-road diesel engines, domestic high-pressure common rail systems have made significant breakthroughs in market promotion, and related technologies have also been improved. Xinfeng Technology's high-pressure common rail products are expected to sell over 100,000 units this year; Aoxin Tianwei's non-road high-pressure common rail products sell 2,000 units per month, and have more than 30 cooperation projects. At the same time, domestic high-pressure common rail companies are actively promoting the research and development of National V and National VI technologies for vehicles, and have made breakthroughs, closely following international advanced levels.

　　10. Foreign Investment in Auto Parts Fully Opened

　　On December 7, the NDRC and the Ministry of Commerce jointly released a revised draft of the "Catalogue of Guiding Industries for Foreign Investment" and officially solicited opinions from the public. The revised draft encourages foreign investment in traditional energy-saving parts technologies, no longer sets equity restrictions on CAN bus and EPS controllers, and cancels the new energy power battery project. On July 19, the State Council's "Decision on Temporarily Adjusting Relevant Administrative Regulations, State Council Documents, and Department Regulations Approved by the State Council in the Pilot Free Trade Zones" proposed allowing foreign investors to engage in the manufacturing and R\&D of CAN bus, EPS controllers, and power batteries in free trade zones in a wholly-owned manner. This changing trend shows that the country has fully opened up foreign investment in automotive parts.