Intensified competition in auto parts industry, corporate profitability is declining year by year

With the slowdown in the growth rate of China's auto market and the increase in cost pressures from automakers, the profitability of Chinese suppliers is declining. In the first quarter of 2013, the margin decreased from 7.8% in 2012 to 5.8%.

From 2009 to 2012, the profit rate of Chinese suppliers has been showing declines, at 10.4%, 9.5%, 8.2%, and 7.8% respectively. On the contrary, by passing costs to parts suppliers and distributors, OEMs have increased their profit margin from 6.9% to 7.4% from 2011 to 2012.

On August 27th, 2013, the 2013 China Automotive Outlook Report released by the global business consulting company Ai Ruibo made the above conclusions. This report was conducted through interviews with more than 100 senior Chinese and multinational companies in the Chinese automotive industry. Executives made.

The report shows that the main challenges for China's parts suppliers to achieve their earnings growth are: increasingly fierce price competition, slowdown in demand from Chinese automakers, OEM customers shifting to lower-cost suppliers, and lack of adequate resources; There is no recovery in the export market.

Increased price competition

The report of Ai Ruibo further pointed out the common problems and current situations faced by China's spare parts industry: Vicious price competition still exists. “The fierce price competition will further deteriorate the living environment of component suppliers. 76.7% of respondents said that price competition is the most severe challenge in 2013. Compared with last year, 54.2% of respondents expressed concern about price competition. In addition, 47.6% of respondents believe that price is an important competitive weapon for component manufacturers."

An executive at a domestic spare parts company, who did not want to be named, told the reporter that behind the price competition, the issue of the single source of technology and poor service capability of Chinese parts and components companies has been exposed. “At present, the entire Chinese parts and components industry has a single source of technology, mainly through joint ventures, cooperation, technology introduction, or independent development. China's parts and components companies lack technology content, so they can only fight prices, and the vicious competition for prices is very serious.”

The above-mentioned executives also stated that each year, the OEM has a price cut for component suppliers. Once it reaches the limit, it will rebound, and parts companies will also rush to raise prices, but they cannot mention it. “Actually, the business environment faced by parts and components companies is also very poor, and accounts receivable are in arrears, which not only results in insufficient investment in R&D funds, but also affects their survival.”

However, the situation is also changing. Some domestic self-owned brands have also started not to “price only” but to value “guarantee ability”, which is the ability to guarantee quality while continuing to provide services.

"Current OEMs' requirements for parts suppliers have changed. They often put forward a requirement and then require parts suppliers to have comprehensive service capabilities such as design capabilities, development capabilities and testing capabilities, rather than giving a drawing as before. As long as the parts factory can produce according to the drawings.” The above person told reporters.

What China's spare parts companies need is to improve their technological content, have comprehensive service capabilities, and can no longer do low-cost vicious competition. In the future, the reshuffle of Chinese auto parts companies will intensify.

70% supplier capacity utilization is less than 80%

The report also pointed out the potential risks in the parts and components industry: Over 70% of domestic parts suppliers' capacity utilization rate is less than 80%, which brings huge pressure on profitability.

According to Ai Ruibo, the overcapacity of the parts and components industry and the overcapacity of the automakers and the super platform strategy launched by the automaker require that the parts suppliers continue to increase their investment.

The average capacity utilization rate of China's automakers is below 65%, while the industry's standard level for stabilizing profits requires an 80% capacity utilization rate. At the same time, there was a clear differentiation between many domestic OEMs and leading international brands of Chinese joint-venture vehicle manufacturers. Sixteen of the more than 30 local OEMs failed to achieve 75% to 80% of the total. Capacity utilization. In contrast, of the 19 joint venture vehicle manufacturers, only one has a capacity utilization rate below this level.

As a result, the differentiation trend of China's self-owned brands is obvious. Leading brands continue to increase their market share, while backward brands do not decline, and it is even more difficult to maintain the second and third line positions.

According to the report of the company, this report indicates that this situation will cause the sales price of the automotive industry to continue to fall. This is especially true for car companies with serious excess production capacity. They have had to maintain a retail price discount of 5 in the past year. % to 15% or even higher.

In addition, the "super platform" strategy launched by OEMs will also change the industry's game rules. "Partners have to invest more and build closer relationships with global automakers to continue to supply components for the automaker's manufacturing platform," said Erica Platinum Managing Director Romano. "To achieve enough With the scale of production and cost-effectiveness, Chinese automobile manufacturers and suppliers have not had much time left. They are also facing a crisis of losing market share."

At present, for many second-tier OEMs, the Chinese market still uses a multi-platform, low-capacity operating model. The production platform of Chinese domestic OEMs rarely exceeds 100,000 vehicles, and even more than 500,000 vehicles cannot be sold. The world’s leading manufacturing platform can produce millions of cars on the same platform.

“As multinational automakers fully implement the super platform strategy in China, Chinese automakers only have three to five years to catch up with the scale and cost level of global platforms, otherwise they will face the lack of cost and scale advantages. The pressure on revenue and profit, said Eric Lihua, director of

Li Lihua finally stated that “Chinese suppliers need to strengthen their global production layout and increase investment in engineering and supply support to meet the highly complex global design needs of their OEM customers.”

The report shows that the major sales growth measures of component suppliers in China include: infiltrating into new models; competitive pricing; expanding sales channels; expanding into new automotive market segments; expanding geographical distribution of manufacturing layout; and increasing export sales.

Ai Ruibo pointed out that under the current limited global network, Chinese suppliers need to make overseas acquisitions to avoid being marginalized under global competition.

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