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Chinese auto parts suppliers are facing increasing competitive pressure.
In the past 10 years, Chinese auto suppliers have always been in a superior position in terms of profitability compared with auto suppliers in other markets such as Europe and the United States. The average profit rate is much higher than that of suppliers in other countries. However, this trend has undergone great changes in the first quarter of this year. The report released yesterday by the global business consulting firm Ai Ruibo indicated that the average profit margin of China's auto parts enterprises in the first quarter of this year was 5.8%, basically equivalent to that of Europe and the United States. Market auto supplier profits are flat.
The average profit margin of Chinese auto suppliers has continued to decline in the past five years. The average profit margin in the first quarter of this year was 5.8%, which was more than 40% lower than the 10.8% in 2009. Director Eric Lihua of Arrow Group told China Business News: “The decline in the average profit rate of Chinese auto suppliers is not optimistic, and it is possible to maintain the same profit margins as auto suppliers in mature markets such as Europe and the United States.â€
Li Lihua said that the reasons for the decline in the average profit margin of Chinese auto suppliers are twofold. First, the price competition among auto suppliers is fierce. Auto manufacturers pass on part of the cost pressure of auto sales price wars to auto suppliers, and annually request annual price reductions for auto suppliers. Another reason is that the capacity utilization rate of auto suppliers is not high, and 70% of auto supplier executives surveyed said that the auto supplier's capacity utilization rate is less than 80%, and the lack of scale can hardly reduce the auto supplier's production cost.
The level of integration of mature automotive markets such as Europe and the United States is relatively high, with 5% of automotive suppliers providing more than 80% of the entire automotive market, but the supply of the Chinese automotive market is relatively fragmented. Based on the local government's pursuit of local GDP, taxation, and employment, the supplier systems of different brand systems are scattered throughout the country, which indirectly leads to insufficient production scale for auto suppliers.
Zhang Haitao, general manager of Huayu Automotive, the largest domestic automotive supplier in China, shares this deep feeling. “HuaYu Automotive also faces the challenge of setting up factories locally. The local government hopes that Huayu Automotive will set up factories in the local area because of the requirements of regional production. However, now that automobile manufacturers are relatively decentralized, we also need to weigh the investment income of setting up factories there.†Zhang Haitao told reporters.
In the future, auto suppliers will have to achieve double-digit sales growth. The biggest challenges facing them are increasingly fierce price competition and the continuous slowdown in vehicle demand. Auto suppliers want to gain more market share. One is to infiltrate into new models or new market segments, and at the same time it is to provide competitive pricing for auto manufacturers.
However, fierce price competition will further deteriorate the living environment of automotive suppliers. The Arrow Platinum survey shows that 76.7% of respondents stated that price competition is the most severe challenge in 2013. Compared to last year, 54.2% of respondents expressed concern about price competition.
At the same time, Chinese auto suppliers will also face the challenge posed by leading automakers' "super platform" strategy. “Super platform†refers to the leading automotive manufacturers that can produce millions of cars on the same platform in order to reduce production costs and even the complexity of the manufacturing process.
Arrow's managing director Luo Man said: "The 'super platform' will change the industry's game rules, so that auto suppliers have to increase investment, and establish a closer relationship with the global auto manufacturers in order to continue to be the manufacturing platform for OEMs The supply of spare parts, but from the current point of view, the super platform strategy is a spread for Chinese auto suppliers, China has not yet welcomed it, has not yet established a global layout, and solutions for large platforms, and suppliers of some models will Lose some market share."