Auto Parts Show: Companies Growing in the United

“In the next two or three years, the auto parts industry will undergo a very big change. The national auto parts dealers will not grow in the alliance, they will die silently in the competition.” Recently, the Chamber of Commerce of At the 63rd National Auto Parts Trade Fair jointly organized by Jinan Municipal Government and organized by Auto China International (Beijing) International Exhibition Co., Ltd., Chi Chao, Marketing Consultant of Beijing Zhengye Hongtong Management Consulting Co., Ltd. told reporters.

Multiple ways to cope with RMB appreciation

With the continuous appreciation of the renminbi, export-oriented small and medium-sized auto parts makers are increasingly rampant. Ji Chao believes that in this case, export-oriented auto parts dealers can take the following measures to deal with: First, although the dollar has been falling, but the euro is relatively strong, so you can use the euro as a currency exchange to give up the dollar. Second, bartering is the simplest form of exchange that uses auto spare parts to exchange Chinese rare or other more precious items such as oil, jewelry and jade with foreign buyers. Third, sign contracts in phases. Since the interest rate for the exchange of RMB against the US dollar has been declining, it can even be said to be one interest rate per day. If companies and purchasers only sign a long-term contract, it will inevitably cause great risks. Therefore, under the framework of long-term contracts, companies and buyers can sign contracts again in phases, such as signing a contract in half a month, which will reduce risks and foreign buyers will fully understand it. Fourth, exports are sold domestically. The growing market for domestic auto parts and accessories is one of the magic weapons for corporate survival. Fifth, increase the technological content and thus improve the competitiveness of enterprises, so that foreign buyers have to buy Chinese companies' products.

Face the competition in India

Ji Chao emphasized that China’s advantage as a low-cost component procurement country is facing the challenges of other Asian countries, especially India. In China, European and American buyers have to face barriers to language communication, which virtually increases costs, while India, the official language of which is English, has no worries in this regard. In addition, India has ample raw materials, especially high-quality steel. At the same time, the cost of labor in India is inherently more competitive than that of China. Coupled with the rising cost of labor in China, this is undoubtedly aggravating the just-started Chinese auto parts industry. It is reported that at present, the average labor cost of China's manufacturing industry is about 250 to 350 US dollars, while the Indian manufacturing industry, such as auto parts workers, monthly salary is only 60 to 70 US dollars.

“In addition to this, Indian manufacturers place great emphasis on development and innovation, such as improving products based on user requirements, and thus prompting manufacturing companies to change their design thinking.” Ji Chao pointed out that these undoubtedly increased the number of chips for Indian auto parts manufacturers. Attracted the eyes of many international buyers.

Mark Hogan, president of Magna Group, made it clear that in the next 10 years, India, not China, will become the focus of attention of automotive companies.

Gu Chunfeng, a business manager of Warner St. Long (Ningbo) Co., Ltd., told the media that at present, the company is competing with its Indian counterparts in exporting some auto parts business in South Africa. In the low-end auto parts such as screws, they have to admit India's price advantage. At the front line, he truly felt the pressure from India.

Business integration is imperative

According to statistics, at least 70% of the world’s top 100 parts suppliers have already started operations in China, and nearly 1200 foreign-owned or joint venture companies that manufacture automotive parts and components in China. In the face of foreign auto parts manufacturers entering the Chinese market one after another, the space for survival of Chinese auto parts and accessories manufacturers has become narrower. Ji Chao pointed out that this era, like the appliance industry before the integration, is experiencing painful struggles, but it must be integrated. China’s auto parts and components are currently a market that is completely open to the outside world, and the future parts and components industry will also be a large international group. The only way to achieve development is by industry associations or stronger auto parts suppliers to lead a region or Firms of a certain product have accumulated to form a relatively large consortium. This will not only increase competitiveness but also increase the weight of negotiations with foreign buyers, and it will also make it easier to obtain foreign venture capital investment.

"In March, at a risk investment conference held in Shenzhen, many investors have said that as long as they are powerful companies, they will certainly invest a lot of money as long as they are good projects." Ji Chao said, at present, China's auto parts companies are all sprawling and have low industrial concentration. Although some companies study or plan good projects, due to their small size, it is hard to attract the attention of foreign venture capitalists. However, if a regional company joins together in some form, it cannot be the same.

According to media reports, the annual development investment of domestic parts and components companies is generally 1% to 1.5% of sales revenue, compared with 3% to 5% or even 10% in developed countries. The investment of parts and components companies should be 1.2 to 1.5 times that of the entire vehicle company, while China's investment is still less than 0.3 times. In the face of weak corporate independent R&D capabilities, Shen Ningwu, deputy secretary-general of the China Association of Automobile Manufacturers, suggested that the country’s experience in the entire vehicle industry could be used to raise funds from the country and establish 2 to 3 national R&D centers for key auto parts and components. The results are shared by the industry.

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