The State Council meeting recently proposed five industries with overcapacity and duplicate production. In addition to these five major industries, from the beginning of 2008 to the present, auto parts companies are facing serious liquidity problems, product backlog, production is difficult.
Severe lack of liquidity
The reporter once participated in the industrial analysis research report meeting of a well-known business consulting company. The theme of this research report meeting was the comprehensive analysis and anticipation of the Chinese auto parts industry. From the overall view of the report, more than 40% of auto parts suppliers surveyed will face serious liquidity problems in 2009. Even the report pointed out that in the next 12 to 18 months, several Chinese auto parts suppliers will face bankruptcy unless they take aggressive measures to retain cash.
Industry analysts said in an interview with this reporter: “In the face of external financing difficulties, coupled with the fact that 2009 is likely to be a year of shrinking profit margins and slowing growth, Chinese auto parts suppliers need to improve their cash completely. Management capabilities to ensure adequate liquidity." He also pointed out: "In China's auto parts supply market, loose credit and cash flow are relatively easy days, which means that the future winners of the market will be those who start with the improvement of working capital and operating performance. , can fully optimize the cash management of various departments of the enterprise."
M&A optimization is imminent
Due to late start-ups and technological reasons, domestic components lack efficiency in supply chain and commercial operations. The survey also showed that the profitability of Chinese suppliers far worse than most of the global peers, only the average profit rate of US suppliers is even lower. Under this circumstance, domestic component manufacturers urgently need effective and rapid measures to make up for existing deficiencies. Proper reorganization and mergers will bring good opportunities for component manufacturers to learn from each other.
Under this circumstance, many auto parts manufacturers in China are already under pressure. SAIC Motor, the leading auto parts manufacturer in Shanghai, has started to integrate the production of its parts and components business from the middle of last year. The increasingly severe competition in the industry at home and abroad, as well as the impact of the international financial crisis.
Not long ago, the bus shares (600741, stock bar) formally passed a resolution to change the name of the company to Huayu Automotive Systems Co., Ltd. After that, the company's main business was completely transformed from a non-profit bus transit to an auto parts independence. R&D, production and sales. Under the premise of a grim situation of auto parts enterprises, through the transformation of the main business of the bus shares, the company will independently supply the auto parts business as a whole. The purpose is also to expand the strength of auto parts production to reduce the operating capital. In the current situation where product sales are blocked and the supply in the international market exceeds demand, this move can better regulate production needs in accordance with its own needs.
Opportunities and Solutions
At the research report meeting of the auto parts industry, the reporter interviewed Mr. Roman, the president of the Chinese auto parts production company, about the severe problems. He said: “When the market and valuation have begun to bottom out, plus the competitive pressures within the Chinese market As we grow, we expect to see a significant increase in M&A activity in China and overseas."
The survey data can also find that for suppliers, an area that can bring opportunities is the aftermarket (sale of parts to retailers and general public), which can be compared with selling parts and components to auto manufacturers. Parts suppliers can bring higher profits. About 60% of the surveyed executives expect this income will increase, which can partially compensate for the loss of their export business. They said that before 2013, China’s aftermarket income is expected to reach 19% of the auto parts supply market.
However, the study pointed out that in order to grasp the opportunities in the aftermarket, it is necessary to change the existing business model, which is not easy for many listed auto parts companies. Mr. Christian Paul, Director of AlixPartners Shanghai Office, said: "Because of the fast-mature auto consumer groups in China and the predictable higher profit margins in the aftermarket, many parts manufacturers are planning to expand aggressively into this market, but Success requires a series of very different skills, new distribution channels and new sales tactics.†However, according to the survey, many existing auto parts production companies lack the technology and production conditions required for market competition. With surplus and weak market digestion, it is easy to encounter elimination.
For the Chinese auto parts supplier industry, this year will be a year of rapid change. Some companies cannot properly manage liquidity and struggle to internalize restructuring. Other companies use the current environment to make themselves stronger. The difference between the two is not just having the right strategy, but also the need for correct and effective execution.
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