Three tight spells have caused parts companies to shrink profits
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In 2006, the domestic parts and components industry was bathed in sunlight and could not escape the storm. "Upstream prices, downstream pressures, and multinational companies competing on the same platform" are "three clinging spells" that cause headaches for many parts and components companies.
Just started in 2006, international automakers and parts suppliers, watching the constant soaring prices of raw materials such as steel and pig iron, are already on their backs.
"For so many years, we have never encountered such a storm. The rapid increase in the price of raw materials has caused us unexpected surprises." Peter Rossenfeld, Deputy Minister of Purchasing of the Chrysler Group, said at the North American Auto Show.
Data shows that the average increase of international steel reached 20%-30%. As a major consumer of steel and pig iron, parts and components companies must be deeply affected. Some experts have analyzed that the huge cost pressures from international automobile manufacturers and parts suppliers will inevitably erode the domestic parts and components companies.
Upstream raw material prices, parts and components companies may be able to solve the cost control means. However, in the face of the lower prices of downstream hosts and OEMs, domestic parts and components companies are simply crying.
"The price of cars is falling every day, new cars are coming out on a monthly basis." This has become the norm in the domestic auto market. With the intensification of competition in the automotive market, price cuts have become a tried-and-tested weapon in the competition of vehicle companies.
RDA, the secretary-general of the National Association of Passenger Vehicles, revealed that profits from the automotive industry in 2005 were 60% of that in 2004, and the profit rate had fallen by nearly half. In order to ensure their own profit margins, the main engine manufacturers and automakers have to kill the players and lower the prices of upstream parts and components companies.
The domestic auto market is becoming increasingly saturated, and it is difficult for automakers to pass on the rising cost of manufacturing from raw materials such as steel products to consumers. The vast majority of this rising cost will be borne by parts and components companies.
The external problems of domestic parts and components companies are particularly greater than internal problems. Following the footsteps of the global giants of 9+2 auto production, multinational car parts predators have entered camps in our country. According to statistics, at present foreign capital has occupied more than 60% of China's spare parts market share.
Delphi, who filed for bankruptcy protection in the United States last year, has a very strong presence in China. It is reported that it now has 15 companies, a technical center and a training center, with a total investment of over 500 million U.S. dollars, becoming the most powerful component group in the Chinese market.
As of 2005, more than 70% of the world's top 100 parts suppliers have started business in China. There are nearly 1200 wholly foreign-owned and joint venture companies that manufacture automobile parts in China.
In the face of "invading forces", domestic parts and components companies lacking technological advantages can only lose ground with the "labour low cost" and are simply unable to compete with the "invasion" of international "parties". Under the strong "attack" of international parts companies, the profits of domestic parts and components companies have shrunk dramatically.