COVENTRY, UK — China is the world’s fastest growing automotive market, but a new study suggests the auto suppliers fueling that expansion may be growing too fast. In fact, says the report, there could be over capacity and a resulting shakeout in the supplier market within five years.

Written by Economist Corporate Network and released by the Automotive Industry Action Group (AIAG) and IBM Business Consulting Services Institute for Business Value, the study was conducted in February.

More than half of the companies responding to the survey in China plan to increase annual manufacturing capacity by more than 20 percent over the next five years. Yet, just one in five expects market demand to equal that rate of growth.

The study found that IT spending among the suppliers was generally low, with more than three-quarters of respondents investing less than $100,000 per year. It also examined major concerns, including an overwhelming need to find and retain good staff, cited by survey respondents as a barrier to successful development. Less than a quarter of those surveyed plan to use enterprise resource planning (ERP) systems to help them automate their systems.

This study reveals extraordinary developments in the regions automotive industry and the volume of response suggests Chinas automotive suppliers are both aggressive and ambitious in their efforts to become an engine for global industry, said Dan Blake, Global Automotive Industry Leader, IBM Business Consulting Services. A critical success factor will be the extent to which they invest in the infrastructure required to make the engine a cost-competitive proposition.

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