The ongoing economic crisis has already imposed severe impacts on the global auto industry. The so-called four emerging countries, namely China, Russia, Brazil and India also witnessed a declining trend in their complete vehicle markets. Due to this, a number of auto parts & accessories suppliers are now pushed on the brink of bankruptcy.

In the USA, the production volume of vehicles reached a record low in Mar. 2009. The declining demand has pushed dozens of parts & accessories suppliers on the verge of shutdown. In Germany, some experts warned that auto parts & accessories manufacturers are faced with unprecedented crisis. In the past three months, 20 enterprises in this field simply disappeared. It is forecasted that more auto dealers will go bankrupt because of their insolvency if the economic climate does not change for the better. In China, a number of internationally recognized auto parts & accessories suppliers are not spared to escape the chilly weather. It is reported that big names like TRW Automotive, Delphi, Johnson Controls, and ArvinMeritor failed showing up at this year’s Shanghai International Auto Show.

Statistics show that the production and sales volumes of light-duty vehicles in China surpassed the USA and reached 1.8 million units and 2.68 million units respectively in the first quarter of 2009, indicating that China has become the largest auto market in the world.

In the first half of 2008, China’s auto industry grew by over 15%. Affected by the financial crisis, the growth rate went down to 2% in the later half of the year. Compared with the 3.2% profit margin of the complete vehicle sector, the profit margin of China’s auto parts & accessories manufacturers was a little higher, standing at 5.1% in 2008. Thanks to the government’s stimulus package, the auto market showed signs of recovery and registered a 3% growth rate in the first quarter of 2009.

However, suffering a lack of government supports for a long time compared with the complete vehicle sector, China’s auto parts & accessories manufacturing industry still has a relatively low concentration degree and lags far behind their foreign counterparts. Right now, the low technological level has increasingly become a bottleneck for the sound development of the whole sector. Coupled by a 16% rise of export costs in recent years, these enterprises, chiefly involved in the non-key parts & accessories areas, are struggling for their survival. In order to acquire the cutting-edge technologies, some domestic companies are now attempting to purchase overseas enterprises. For example, in the first quarter of 2009, Weichai Power bought MBS and Geely acquired DSI. Besides, Beijing West Industries Co. of China has reached an agreement with Delphi for the acquisition of the company’s global braking and suspension business.    

How to improve the current situation? It is likely that the high profit margin of the post-sales market will offset the loss brought by shrinking exports. However, it is noteworthy that auto parts & accessories manufacturers are going to face a host of challenges to enter the post-sale market. Some companies of small scale can hardly bear the high costs. Moreover, complete vehicle manufacturers are constantly strengthening their control over the post-sales market. In sum, the small-sized auto parts & accessories businesses have no rivaling power against the complete vehicle builders. Given this, it is no surprising that these companies are seeking merger and acquisition to gain a solid footing in the industry.

Source : english.chinabuses.com

Editor : Mark

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