"I'm sorry, I have to listen to who it is now." Zhou Liangfen, manager of Zhejiang Ruian Auto Parts Co., Ltd. hastily interrupted the conversation with the reporter and his impatient look appeared on his face.
Here is the scene of the Gasgoo.com Purchase Matching Meeting on December 11th. More than 500 domestic auto parts companies have surrounded 76 buyers in all levels, hoping to seize a bit of luck in the cold auto market. The staff shouted: "Don't crowd, everyone shouldn't be crowded, and the number is in." More people are still anxiously waiting outside the negotiation area.
The sharp decline in the sales volume of the automotive market for consecutive six months has caused a huge impact on the upstream-auto parts suppliers. The large-scale production shutdown of the factory and the sharp drop in business volume have caused most companies to cut more than half of their employees, and some companies face the risk of closure.
The more pessimistic outlook may still be ahead. The US Senate has just rejected the rescue plans of the three giants GM, Ford, and Chrysler. The Chinese auto market is expected to continue negative growth in 2009, and the global and domestic auto market continues to shrink. More than 10,000 auto parts companies in China are suffering in this cold winter. Invasion.
Significantly shrinking orders
"Orders have been cut in half," said Hu Zhizhi, chairman of Shanghai Dayou Plastic Mold Co., Ltd. Shanghai Dayou Plastic Molding Co., Ltd. was established in 2004. Its main business is plastic mold products in the body. The peak sales period is about 50 million yuan. The company opened a branch office in Beijing this year. It originally planned to enter the Beijing market with great fanfare, but the pace of expansion was suspended due to severe industry adjustments.
“Our company originally had more than 400 people, and it has recently been decided that there are only 100 people left,†said a staff member of a Shanghai car seat company.
In the country, vehicle manufacturers stopped production and semi-discontinued production. The demand for spare parts has been greatly reduced. Correspondingly, auto parts companies have to lay off personnel and lower production schedules to minimize costs and ensure operations.
"The spare parts company's capacity utilization rate is only 10% to 20%," industry analysts said. According to statistics, low-value-added manufacturers such as stampings, lamps, castings, etc. have been hit hardest in this industry crisis, and small parts companies have gathered in places like Zhejiang, where large-scale production shutdowns or even closures have occurred.
According to statistics from the National Bureau of Statistics in 2006, there are more than 10,000 auto parts companies in China. In the context of the rapid development of the auto market in 2007, more individuals and entities were involved in the manufacturing of auto parts and components.
"If you invest hundreds of thousands of dollars, you can build a plastic piece or a processing factory." said a technical person in charge of a company in Zhejiang. A large number of investors poured into the manufacturing of parts and components to produce low-value-added processing parts and castings, which were then supplied to second- and third-tier buyers. This part of the company suffered the most in this round of crisis.
According to Chen Wenkai, president of Gasgoo.com, it is expected that 5% of auto parts companies will be acquired or voluntarily closed down.
On December 10th, the Frankfurt Auto Parts Exhibition was held in Shanghai. The scale of the exhibition exceeded 80% last year. On December 11, the number of exhibitors reached its peak. The person in charge of the BAHCO China office in Sweden told the First Financial Daily that due to the poor market conditions, the parts companies have been greatly impacted and everyone has to participate in more exhibitions in the hope of finding new business partners.
The person in charge of a wire harness manufacturing company in Shanghai said in a self-deprecating manner that attending such an exhibition is tantamount to “putting a needle in a haystackâ€, but even so, it is still necessary to try it out.
Internal Causes That Cannot Resist Risk
"Few customers, single products, lack of a diversified layout, lack of strategic awareness and marketing capabilities are common problems for China's auto parts companies. When a small number of customers are impacted, suppliers will inevitably suffer damage," said Chen Wenkai.
China Auto Parts Company is characterized by a large number, small scale, single product and customer, low price, and thin profit. In 2005, the National Bureau of Statistics reported that there were more than 6,000 enterprises with an annual output value of 5 million yuan, accounting for more than 70% of the total number of domestic auto parts companies. The annual output value is less than 100 million yuan. During the interview, more than a dozen auto parts companies interviewed by the reporter only had the annual output value of Jiangsu Senwei exceeding 100 million yuan, and other companies were mostly about 50 million yuan, and some companies had annual production value below 10 million yuan. These companies are mostly from Zhejiang, Shanghai and Jiangsu.
The rapid development of China's auto industry has covered many issues. These problems appear in the next "bear market." In addition to the above reasons, the lack of management of customers, the lack of long-term positioning of the company's operations, and the backwardness of technology all contribute to the damage to the parts and components industry.
A person in charge of a foundry company in Jiangsu said that the company’s products can achieve the same level of performance as foreign capital, but the cost of high-performance products can't go down, so they can't compete with foreign companies.
In fact, in the process of participating in international competition, Chinese local companies mostly win at low prices, and mistakenly believe that low prices are everything.
“Our horns have very thin profits. Compared with foreign investment, technology is no better than others.†Wu Hongwang, deputy director of product development at Tianjin Hongbo Electronics Co., Ltd., said that a foreign car with a good horn can sell for tens of thousands of yuan. Some speakers are priced at less than 100 yuan.
"Low prices are not necessarily useful, long-term wins on prices, thin profits, and weak ability to withstand risks. Long-term stability and ability to acquire technology are more important," Chen Wenkai reminded.
In the VIP room for buyers to rest, there are several buyers from India, Germany and the United States. They stated that buyers do not simply choose suppliers at low prices, but will assess suppliers from inventory ratios, technical capabilities, financial status, and other aspects to ensure that suppliers can provide sufficient quality in a long-term and stable manner. And the number of products. Companies that are low priced but do not have long-term development capabilities cannot enter the procurement list, which is often overlooked by Chinese parts companies.
"China's spare parts company's products can do Global, but the company can not become Global, precisely because of the differences between Chinese and Western concepts." Chen Wenkai said.
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The situation may deteriorate further in the future
The three major auto giants in the United States have not yet emerged from the quagmire, and Japanese representatives have begun to take the initiative to “withdraw troopsâ€. The Japan Broadcasting Association reported last Thursday that Toyota Motor Corporation is considering reducing global production to 8 million vehicles in 2009, in response to its continued decline in sales in the United States and Europe.
Including Korea Hyundai, France PSA, Renault, Italy Fiat, Germany's Daimler, including the automotive companies have announced production cuts in the fourth quarter.
The global auto giants' production cuts will lead to fewer buyers coming to China, which is not good news for Chinese parts companies. A representative of a buyer who attended the Gasgoo Matchmaking Association revealed that because of the company’s financial squeeze, it is not easy to apply for a ticket for a business trip to China.
The situation in China is even less optimistic. Although the entire vehicle industry has seen large-scale production cuts and layoffs this year, the decline in sales volume and the impact of inventory have not been truly reflected, and it is expected that there will be a new low in 2009. The current consensus is that negative growth will occur in 2009, with production and sales lower than in 2008.
There are already many auto companies and consulting organizations in the country that 4 trillion yuan of domestic demand will not have too much positive impact on auto consumption. Even commercial vehicles that are more closely linked to infrastructure will not benefit significantly.
In addition, companies with strength have begun to clean the "battlefield." The Bosch Group's global acquisition peaked. In November of last year, Bosch acquired a spare parts company in Brazil. In 2007 and 2008, they respectively acquired Bisbatt, Italian Suzuki, and Shenzhen Weiningda in China. China's native Wanxiang Group and Fuyao Glass also began expansion and acquisitions. Fuyao Glass launched eight expansion projects and new projects across the country, involving a total investment of 2.77 billion yuan.
“The most likely scenario is that market leaders (referring to large and powerful companies) squeeze competitors, expand production capacity, and force small suppliers to die.†Chen Wenkai said.
Self-help opportunities from overseas
Competition in overseas automobile markets such as Europe and the United States will further intensify in the future. In order to increase competitiveness, auto companies must inevitably increase the purchase of cheap parts and components. “Chen Wenkai believes that from the overall market perspective, the total demand for parts and components in overseas markets is declining. However, the lowest-end low-cost parts and components will show an upward trend. This is an opportunity for Chinese parts manufacturers.
At present, PSA Peugeot Citroen, Ford, and Mitsubishi of Japan have clearly expressed their intention to increase procurement efforts in China. According to Xu Qinglu, vice president of procurement for PSA Peugeot Citroen Group, the proportion of procurement in low-cost countries will increase from 23% in 2007 to 40% in 2010, with a scale of approximately 6 billion euros.
Another opportunity for local parts companies is the strategic shift of overseas auto giants. The high labor costs in the United States and Europe have made auto companies overwhelmed. According to General Motors internal information, the company is brewing strategic shifts and shifting the manufacturing and R&D of gasoline and diesel vehicles to emerging markets with low labor costs. The first implementation will be to establish a wholly-owned R&D center in China.
Thanks to the strategic transfer of multinational companies' production and R&D departments, China is expected to become a global automotive industry's market, which will generate more demand for spare parts, software outsourcing and services in China.
"But China Auto Parts Company must still implement a strategic transformation." Chen Wenkai said that changing the previous "growth is everything" model, hoarding funds for research and development, improve the quality of management and marketing in order to achieve long-term stability and development.
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