Chinese auto parts industry in financial crisis

In recent months, the economic crisis triggered by financial markets has swept the world, and the United States has been the first to suffer. Especially with the bankruptcy or the acquisition of giants such as Bear Stearns, Lehman Brothers, and Merrill Lynch, people have clearly recognized that the global economic turmoil has already come and the world economy is facing a risk of recession.

At this time, as an important part of the real economy, the auto industry cannot be left alone. The three major auto companies in the United States have been in crisis and Toyota Motor has lowered its global sales target. In September alone, US auto sales fell 27% year-on-year, the largest drop in the US in 50 years. The domestic auto market has also been affected and has been declining for five consecutive months. The financial crisis has undoubtedly increased the lukewarmness of the auto market. In the face of the lukewarm auto market, auto parts and auto companies are also suffering. Many companies have already fallen into production due to a significant reduction in the volume of orders. How the future development trend of the industry has become a topic of common concern in the industry.

Xijie Yousheng believes that under the influence of the financial turmoil, China's auto parts and components, the short-term depression is inevitable; but in the long term, with the adjustment of the auto industry structure, the industry's integration and reshuffle, especially in the country The market and auto parts industry still have enough room for development.

First, the correlation between the national economic recession and the financial crisis is not high. The change in economic growth also determines the temporary nature of the economic turmoil.

During the whole year of this year, the overall situation of the country’s economic development was not optimistic. The economic data of the first three quarters just released by the National Bureau of Statistics last week also showed that the growth rate of the value added of industrial enterprises above designated size in the country has dropped from 18.5% in the same period of last year to 15.2 this year. %, there were 25 decelerations in different degrees in 31 provinces, autonomous regions and municipalities across the country, and the provinces with a deceleration rate of over 5 percentage points reached 1/3. However, the deceleration of economic development is in fact not very relevant to the financial crisis.

First of all, it is undeniable that the export decline caused by the financial crisis has obviously dragged down the industrial growth rate this year.

However, the broader phenomenon of industrial deceleration is not caused by export factors. First, the well-known 50-year-old frozen rain and snow disaster at the beginning of this year has caused more than a dozen damages to the power facilities of the power grids in more than a dozen provinces, municipalities, and regions in the south. Hunan’s industrial added value grew only 7.5% in the first two months of the year. However, Guizhou is down by 18%; the second is the 5.12 Sichuan Wenchuan earthquake. The sudden assault of the major earthquake caused the growth rate of industrial added value in Sichuan Province to fall from 24.6% in April to 3.6% in May. In the first nine months, the growth rate of Sichuan's industry dropped by 5.5 percentage points year-on-year. The third is the Beijing Olympic Games that the Chinese people are proud of. In order to meet the standards of air quality during the Olympics in Beijing and the co-host cities, the six provinces, autonomous regions, and cities in North China have paid the price for stopping the production of some industrial and mining enterprises. As a result, Beijing and Hong Kong experienced negative growth of 9.1% and 6.4% respectively in the two months of the year. In July, the industrial growth rate of Hebei, a major province of steel, dropped sharply from 23.2% in June to 13.3%. Shandong is the venue of the Beijing Olympic sailing competition. The location, in order to protect the Olympic Games, has adopted power restriction measures. The accumulated industrial growth rate in the first three quarters has dropped by 5.2 percentage points year-on-year. Fourth, this year, in order to prevent the overheating of the economy and the tightening of financial policies, the country’s financial credit volume has been drastically reduced. Especially in the real estate industry and some large industrial enterprises, the capital gap is huge, and the investment in fixed assets has dropped rapidly, which has slowed the rate of economic development. All of the above-mentioned sudden and accidental factors, involving more than half of the provinces in the country, have caused the phenomenon of industrial deceleration caused by the economy itself to be significantly amplified.

However, under the government's macro-control, we believe that this economic turmoil is temporary. First of all, in the short-term factor, under the principle of “maintaining growth” by the central government, the state has already taken some measures that can be effective in the short term, such as raising the tax rebate rate for the two main export-oriented products such as textile and apparel within three months. As well as loosening money and credit, plus the sharp fall in energy and resource prices, and higher earnings expectations, the company's production and business difficulties will be significantly eased and production enthusiasm will increase. At the same time, some local governments have already issued their own jurisdictions. The "guaranteed growth" of the New Deal. In terms of long-term factors, the state has proposed a long-term economic growth mode that stimulates domestic demand and vigorously develops rural infrastructure. This shows that the country’s economic development is shifting from investment-oriented to consumption-based, and from industrial investment to infrastructure investment. This provides a guarantee for the long-term stability of the economy.

At present, the national economy is in a period of adjustment. Under this background, the temporary recession in the auto industry and parts and components industry is inevitable. However, in the long run, economic development is a guarantee, and the continuous development of the parts and components industry is also inevitable.

Second, the impact of the financial crisis on China's economy is mainly in the export economy and the virtual economy. The impact on auto parts and components is limited.

The current global economic crisis began in the financial industry, causing social capital shortage, production and consumption capacity decline, and further affecting the real economy, leading to economic recession. As far as China is concerned, he directly influences the two aspects of the export economy and the fictitious economy, and to a certain extent causes the recession of the real economy.

The financial crisis has had the greatest impact on the financial industry, which is more developed in Europe and the United States. The economic recession in these countries is also very obvious. This has caused their rapid decline in global purchasing power. As China's "world factory," exports occupy a very important position. The decline in purchasing power of developed countries will inevitably lead to a decline in the export economy.

China's auto parts and components exports have continued to grow in recent years, with an average annual growth rate of nearly 40%. By 2007, it has reached 12.12 billion US dollars, or about 85 billion yuan. In 2007, the total revenue of parts and components in China was 670 billion yuan, and exports accounted for 12.6% of total revenue. This proportion shows that while exports play an important role in the parts and components industry, the main market for parts and components is still the domestic market.

However, at the same time as the rapid decline in vehicle production, the automotive service market is less affected by the financial crisis. In the first half of this year, the US auto service market still maintained a growth rate of about 5% in the Great Depression. This is caused by consumers not buying new cars and repairing old ones in order to save expenses. The export products of China's auto parts are mainly used in the service market, and the output of foreign automakers is also relatively small. Therefore, the weakening of the export market will inevitably have a relatively large impact on the export-oriented enterprises, but it will have a limited impact on the overall industry.

Auto finance in foreign countries is a very important part of the financial market, while China's auto financial market is not developed and there are few related products. Consumers are more inclined to use savings and cash for car consumption. Therefore, the direct impact of the financial crisis on China’s auto and parts markets is also very limited.

In addition, China's financial system is not very open, and the number of financial products is also relatively small. This makes the current financial crisis practically limited to China's financial system, and will not affect the real economy of China. At this point, relevant state departments have made several statements. And at the end of October, the country has formulated a macroeconomic control policy to stabilize the financial market. Therefore, the industry does not need to be overly pessimistic about the domestic economic development trend, but should adjust it according to the market demand.

[NEXT] Third, China's auto market is in a period of development, and the auto market's slump is an adjustment after high-speed growth. As the auto consumption structure is changing, auto parts industry still has enough room for development.

In the past few years, the Chinese automobile market has experienced explosive growth. In 2007, sales reached 8.97 million vehicles, with an average annual growth rate of more than 20%. Reviewing the development of China’s auto market in recent years, it shows a very obvious cycle characteristic. In 2002 and 2003, it was a period of rapid development of the automotive industry. However, after rapid growth, car sales declined rapidly and the industry entered an adjustment period; After 2006, the rapid growth of the private car market led to a rapid rise in car sales. In the first three quarters of this year, 7.22 million vehicles were sold. We expect this year's auto growth rate to be approximately 10%, and by the end of the year it will reach 9.67 million.

The direct cause of the downturn in the auto market is due to changes in policies and instability in the financial markets. The instability of the financial market, especially the volatility of the stock market, has devalued the assets of middle-class residents in urban areas, reduced the spending power, and affected passenger vehicles. The change in national policies has changed the investment structure, and commercial vehicles have been affected.

By September, the production and sales performance of auto passenger cars and commercial vehicles were not as good as those in the first half of the year. The increase in commercial vehicle sales fell more than that in the first half of the year. Passenger car sales amounted to 510.32 million units, an increase of 12.29% year-on-year. Compared with the first half of the year, the growth rate decreased by 5.71%. Compared with the same period of last year, the growth rate decreased by 12.48%. The sales of commercial vehicles were 2,126,600, a year-on-year increase of 13.35%. Compared with the first half of the year, the growth rate decreased by 8.63 percentage points; the growth rate decreased by 12.66 percentage points compared with the same period of last year.

Although the growth rate has declined, the overall decline in the auto market's growth rate does not mean that the auto parts market will continue to slump. More reasons indicate that the Chinese auto industry will continue to develop steadily. It will also promote the continuous development of the auto parts industry.

First, the Chinese auto market is different from the European and American markets, and there is still room for development in the auto market. As a mature automobile market in Europe and the United States, there is little change in car ownership. His car consumption is mainly updated and closely linked with finance. Once the economic downturn occurs, consumers will stop buying new cars. Most of the maintenance is done to ensure the use of the car, so he was greatly affected by the financial crisis. In China, auto consumption is still at a stage of development, and the amount of auto ownership is still very small compared to the population of China. Car consumption is still dominated by the first purchase of new cars, and market demand is far from being met.

Second, China's auto rural market is about to start fully. In the previous stage, China’s automobile consumption was mainly concentrated in urban and industrial investment. China is a large agricultural country and has a very large rural market. This market has not yet been fully started. However, with the convening of the Third Plenary Session of the 17th CPC Central Committee, the development of rural areas has entered a substantive stage. The income of farmers and investment in rural infrastructure will surely increase substantially in the near future. This will lay the foundation for the full launch of the auto market. The market of 940 million farmers will inevitably ensure the sustainable development of the auto industry.

Third, the development of the automobile maintenance market will promote the steady development of the parts and components industry. China’s car ownership continues to increase and it is expected to reach 80 million by 2010. The increase in car ownership will obviously increase the demand for spare parts maintenance. In addition, as China's auto consumption is still a relatively high consumption for residents, residents generally do not easily change vehicles, but try to take maintenance. Therefore, in the future, with the increase in the number of car ownership, the automobile maintenance service market will develop rapidly, which provides a basis for the continuous development of the parts and components industry. However, the development of China's auto maintenance market is still not enough. Parts companies are more concerned with supporting markets and the service market is confusing. They are occupied by non-original parts with low quality for many years and are slow to develop and cannot match the entire vehicle market. The market also needs effective integration and rectification in order to achieve better development.

In summary, we believe that the development of the auto parts industry should not be pessimistic. In the short term, although the growth of the auto market faces some problems, the decline in the auto industry's growth rate cannot be avoided. But in the long run, continued growth is still the mainstream of the industry.

4. Under the current economic turmoil and the declining auto market, enterprises should adopt a positive attitude and consider future development strategies.

The first is to train your own efforts. Enterprises should strengthen cost control and research and development, especially products with high technological content, strive to increase the added value of products, seize the opportunity of the global industrial spare parts industry, and further seize the global market with the advantages of cost and technology.

Second, to strengthen industry consolidation, the financial crisis will inevitably accelerate the survival of the fittest in the industry, resulting in a decline in capital prices, thereby promoting the industry to produce a giant-sized company. The United States’ three-car company emerged during the economic depression in the 1920s. Companies with strength in the auto parts industry should boldly integrate the industry, expand the scale, and optimize the company's strategy under the premise of ensuring that the current capital price is sufficiently low and the long-term development prospects of the industry are guaranteed. Layout, improve the competitiveness of enterprises.

The third is to attach importance to the service market. The service market is under the huge base of China's car ownership. The future potential is endless, but the potential shares of the Chinese automobile industry still need to be further improved and standardized. Enterprises should seize the current entry. The low-cost opportunities stand still, and some poor SMEs face the opportunity to be eliminated by the financial crisis and quickly enter. Lay the foundation for long-term development in the future.

In short, in this global financial crisis, Chinese auto parts companies should neither be overly pessimistic nor be taken lightly. We must not only prepare for the winter, but also have the courage to make adjustments, through the integration of the industry and continuous market development, and constantly improve their own capabilities to further combat the impact of the financial crisis. But at the same time, we must accurately assess our own capabilities and find the right positioning.