Research on Auto Parts Industry Upgrading Based on Internet of Things

Abstract

Based on the importance of development and upgrading of auto parts industry, the article analyzes the location of auto parts industry. In order to achieve further development and upgrade, five factors influencing China auto parts industry upgrading are put forward afterwards in this paper. They are market demands, resource supply, technology level, system and policy and international trade. An empirical analysis is made by multivariate statistical regression methods and testifies the result of qualitative analysis above and then gets the quantitative conclusion.

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474 The Open Electrical & Electronic Engineering Journal, 2015, 9, 474-478
1874-1290/15 2015 Bentham Open
Open Access
Research on Auto Parts Industry Upgrading Based on Internet of Things
Chen Caiyuan
1,*
and Wang Long
2
1
School of Economics, Wuhan University of Technology, Wuhan, China
Abstract: Based on the importance of development and upgrading of auto parts industry, the article analyzes the location
of auto parts industry. In order to achieve further development and upgrade, five factors influencing China auto parts in-
dustry upgrading are put forward afterwards in this paper. They are market demands, resource supply, technology level,
system and policy and international trade. An empirical analysis is made by multivariate statistical regression methods and
testifies the result of qualitative analysis above and then gets the quantitative conclusion.
Keywords: Auto parts industry, industry upgrading, empirical analysis, multivariate statistical regression, qualitative and quan-
titative analysis.
1. INTRODUCTION
Auto parts has been playing an increasingly important
role in the automotive industry as the basis for the automo-
tive industry [1]. Auto parts industry is the premise and
foundation to enhance the competitiveness of automotive
industry in general [2]. Auto parts industry which has high
permeability with other industry can promote the develop-
ment of related product industry including a number of in-
dustries of steel, instruments, plastic and glass [3]. In the
global automotive industry value chain, auto parts worth
about 50% of total value chain. Automobile and parts indus-
try played a crucial role for the development of the country.
Auto parts industry as the most important part in automobile
industry chain which is in the upper reaches of the automo-
bile industry chain has increased the competitive landscape
of the auto parts industry with the global procurement of
automobile companies [4]. Auto parts industry upgrading has
become increasingly urgent with the background of increas-
ingly competitive automobile industry. Automobile compa-
nies have a series of changes for “large and all” to “small but
fine” and become more and more professional. The way of
MMC reduces the self-rate of components, so the original
dependency between vehicle and parts business has under-
gone changes which means auto parts industry has must
change also [4].
The current way is part of mainstream business and au-
tomobile companies to establish long-term stability of the
market based on the guidelines of the strategic partnership.
Auto parts industry production has changed from geograph-
ical specialization of the division of labor to shift further
accelerate the pace of industrial transfer to transfer low-cost
countries [6]. The rapid development of auto parts industry
faces some challenges. There appear some factors which
affect industrial development including rising resource prices
and labor costs and a series factors of financial crises [5]. It
is a must to make timely adjustments and donduct industrial
upgrading [7], otherwise the development of auto parts in-
dustry will be hindered. Therefore, it is very important to
reasearch and study the factors which affect the auto parts
industry and start from the key factors to use the limited re-
sources in order to break out and improve the weakness [8].
The more important thing is to maximize the initiative to
promote the development of auto parts industry upgrading
and form the production management system supporting the
automobile market [9, 10].
The rest of the paper is organized as follows. In Section
2, overview of auto-parts industry is summarized briefly. In
Section 3, reasearch of auto-parts industry upgrading is de-
scribed. In Section 4, empirical analysis are presented and
the results are discussed. Finally, a conclusion is provided in
Section 5.
2. OVERVIEW OF AUTO-PARTS INDUSTRY
As shown in (Fig. 1), the development trends of auto
parts industry are very obvious including the following four
aspects: (1) Acceleration of international industrial transfer
and merger activity. It is predicted that there are about 5,500
major auto parts companies in the world, but of which more
than 2000 enterprises will be eliminated. Also the top 20
firms who dominate the world automotive market share will
rise from the current level of 27% to 50%. These changes
will push the process of worldwide auto parts industry of
mergers and restructuring which will reduce the number of
first-level suppliers. (2) Technical standardization of auto
parts, electronics and intelligent. Auto parts with standardi-
zation and common is the basis for industrial production and
improve versatility of parts which will make the best compo-
nent sharing as possible and thereby expand the scale of pro-
duction of parts to reduce the high costs due to the ever-
shortening product life cycle of automobile. The main prod-
ucts of auto parts have been changing from mechanical de-

Research on Auto Parts Industry Upgrading The Open Electrical & Electronic Engineering Journal, 2015, Volume 9 475
vices to consumer electronics products. (3) Modular grading
supply system. Automobile factory increasingly tends to a
modular and systematic procumbent. It’s more closely for
collaboration between suppliers and make auto parts plant to
reduce the number of parts to form a new assembly module.
Global automotive supplier system gradually evolved pagoda
structure including three distinct levels: plant is responsible
for the whole supply chain management in the first level and
parts supplier is to become the second and third suppliers
which make cooperation between the supply chain more
standardized. (4) Trends in cluster development. From the
point of view of industrial structure, the automobile industry
is a complete organic production system with vehicle manu-
facturing, component manufacturing and automotive ser-
vices. Its features of long industry and many associated in-
dustry determine the advantages of cluster of automobile
industry.
Despite the development of auto parts is rapid, there also
exists some problems. a) It’s so difficult to form scale of
auto parts industry due to the irrational structure. b) There is
not enough funding for research and development, then the
technology is very low and independent innovation capabil-
ity is not strong. c) Parts industry and automobile industry
development are not in synch which restricts the develop-
ment of parts industry. d) Parts industry is not concentrated
and it is difficult to form cluster.
3. REASEARCH OF AUTO-PARTS INDUSTRY UP-
GRADING
Auto parts industry upgrading includes the upgrading of
industrial structure.
1) Industry level. Upgrading in industrial level is mainly
from the upgrade of industrial structure to technology up-
grades and then to the position as shown in (Fig. 2).
2) Enterprise level. Firm-level upgrade is mainly from the
upgrade of manufacturing system to enterprise technology
upgrades and then to enterprise brands as shown in (Fig.
3).
Under the premise of a smooth embedding in the global
value chain, the strategy for future development of China's
auto parts industry should be like this. Government guides
local parts companies to break through on the value chain
governance patterns through the development of relevant
industrial policies and adjust its connection with the global
value chain in order to seek greater development space of
China's auto parts industry.
In addition to government industrial policy support, Chi-
nese parts companies which as the subject of innovation pol-
icy and practice and implementation of value chain govern-
ance patterns should enhance the supply capacity by the way
of increasing the strategic investments, strategic reorganiza-
tion, entering new markets and new value chain.
3. EMPIRICAL ANALYSIS ON THE AUTO PARTS
INDUSTRY UPGRADING
3.1. Basic Model and Variable Selection of Empirical
Analysis
(1) Basic model.
Cobb-Douglas function can be used to study the relation-
ship between inputs and outputs in a country or region. We
used this economics of mathematical models to study labour
and capital which inputs on the progress and development of
China's auto parts industry. The basic model is as follows:
(t)
YALK
αβ
µ
=
(1)
When
1
αβ
+>
, it is increasing returns industry
that it is benefical to expand the scale of production to in-
crease economic output for technology. It is opposite when
1
αβ
+<
. In the case of
1
αβ
+=
, it shows that
productivity is not rose in tandem with the expansion of pro-
duction scale and we can increase economic efficiency only
by improving the technical level.
ADF test is used to verify if the time series is stationary.
Stationary time series can construct a regression model and
other econometric models. Non-stationary time series is to
have a smooth sequence by differential elimination unit root,
it will return the regression analysis that is pseudo. Two de-
lay difference regression model is as follows:
11 2 1 2 2 4 5tt t t t
YY Y Y te
ββ β ββ
−−−
Δ= +Δ +Δ + + +
(2)
Auto Parts Industry
Market demand TechnologyResources
Domestic demand Foreign demand
Natural resources
Labor resourcesCapital resources Technology introduction Technological innovation
Policies Import and export trade
Trade barriers
Domestic Import Export
Fig. (1). Factors affecting the auto parts industry upgrading.

476 The Open Electrical & Electronic Engineering Journal, 2015, Volume 9 Caiyuan
and Long
Upgrading of industrial structure Upgrading of industrial technology Upgrading of industrial position
• Specialization and scale
• Integration of total and
Individual
• Industry concentration
• The ability of independent
innovation
• Quality system certification
• Modular development capabilities
• The ability of independent
innovation
• Active participation in national and
international division
Fig. (2). Auto parts industry upgrade path.
Upgrading of manufacturing system Upgrading of enterprise technology Upgrading of enterprise brands
• Production equipment
• Manufacturing cost
• Management level
• Investment in R&D
• Core technical competencies
• Level matching the vehicle
research and development system
• Ratio of own-brand products
• Private label product awareness
Fig. (3). Auto parts enterprise upgrade path.
(2) variable selection
The article chooses quantifiable variables to conduct
empirical analysis on China's auto parts industry upgrading.
1) The explained variable
Y
. The article selected indica-
tors of value chain upgrading of industrial added value in
consideration. 2) Capital input
K
. It is indicated by fixed
capital investments in auto parts industry. 3) Labour input
L
. This article assumes that the labor force is equal to the
total number of employed persons. 4) Technological inno-
vation
R
. Technological progres is representative of the
amount of investment in research and development. 5) De-
gree of external trade
Z
. The article selected the total im-
port and export volume to reflect. 6) Degree of marketiza-
tion
M
.
Table 1. Variable unit root test results.
Variable
ADF
(c,t,n)
Critical Value of 1%
Critical Value of 5%
Stationarity
InY
3.177
(0,0,0)
-4.800
-3.791
No
D(In Y)
-3.796
(0,0,0)
-2.740
-1.968
Yes
In K
-2.813
(0,0,0)
-4.800
-3.791
No
D(In K)
-4.722
(0,0,0)
-2.728
-1.966
Yes
In L
1.547
(0,0,0)
-2.728
-1.966
No
D(In L)
-2.032
(0,0,0)
-2.754
-1.791
Yes
In R
-2.025
(0,0,0)
-4.800
-3.791
No
D(In R)
-3.965
(c,t,0)
-4.886
-1.970
Yes
In Z
1.488
(0,0,0)
-2.754
-1.970
No
D(In Z)
-4.011
(0,0,0)
-4.886
-3.828
Yes
In M
-1.234
(0,0,0)
-4.059
-3.118
No
D(In M)
-2.809
(0,0,0)
-2.754
-1.970
Yes

Research on Auto Parts Industry Upgrading The Open Electrical & Electronic Engineering Journal, 2015, Volume 9 477
3.2. Results
This article will use the Eviews6.0 measuring software to
conduct empirical analysis for development of China's auto
parts industry and its influencing factors and verify the im-
pact and contribution of these factors on China's auto parts
industry development. Test results are presented in (Table 1
and 2).
D(lnY) represents the first-order difference of InY. The c,
t and n represents the intercept term, trend and lag order.
From the data above, we can get:
ln 6.62 0.563ln 0.814lnYLK=− + +
(3)
ln 3.242 3.082lnYR=+
(4)
ln 14.295 2.05lnYM=+
(5)
ln 11.172 5.456lnYZ=− +
(6)
The article conducts empirical analysis of the five fac-
tors, results are shown in (Fig. 4 and 5).
0 2 4 6 8
0
2
4
6
8
10
Total amout
Time series
K
L
R
Z
M
Fig. (4). Drop line of empirical analysis of factors.
From the results presented above, resources of capital
and labor inputs, the degree of technological progress, trade
and market-oriented upgrades on the auto parts industry has
more or less influence. Capital resources and impact of la-
bour input in the two comparison shows that while capital
and labor resources upgrade on the auto parts industry has a
positive role. Capital investment will contribute significantly
to upgrading automobile parts industry. Based on high extra-
version, foreign investment of auto parts industry plays the
important role and increases the financial support.
0 2 4 6
-8
-6
-4
-2
0
2
4
6
8
10
12
Total amout
Time series
Capital input
Labour input
Technological innovation
Degree of external trade
Degree of marketization
Fig. (5). Results of empirical analysis of factors.
CONCLUSION
Technological progress is a strong boost to development
of automobile parts industry with long-term stability and
relevance. Auto parts industry is still shown as increasing
scale enterprises. Investment in research and development
will strengthen technical innovation and the core technology
means we can take control of the core and a high added val-
ue links in the industrial value chain to improve the subordi-
nation of value chain and speed up industrial development
and upgrading greatly.
It is desirable to further apply empirical analysis to solv-
ing those more complex real-world optimization problems
and it will be our further work.
CONFLICT OF INTEREST
The authors confirm that this article content has no con-
flicts of interest.
ACKNOWLEDGEMENTS
This work is supported by education department project
“performance measurement of achievement of university”
(EFA090413).
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Hypothesized
No. Of CE(s)
Ejgenvalue
Trace
Statistic
0.05
Critical Value
Prob.
None
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82.76715
29.79707
0.0000
At most 1
0.634763
14.29747
15.49471
0.0052
At most 2
0.442770
6.811968
3.841466
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Received: June 18, 2015 Revised: August 22, 2015 Accepted: September 31, 2015
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