In the face of accelerating the deployment of foreign capital, how local Auto Parts manufacturers can use their advantages to avoid being “marginalized†and even being squeezed out of the market will be a major test.
Through mergers and acquisitions, building industrial clusters and forming "clustering" advantages, it may be possible to increase the resistance of local companies to risk.
Almost at the same time, the giants of the three major foreign auto parts fell to "sub" Wuhan.
The world’s top 500 companies and China’s largest manufacturer of automotive wire harnesses—the ninth Chinese manufacturing base of the Delphi Packard Electrical System was officially launched in the Wuhan Economic Development Zone. Prior to this, Delphi Pike had eight production bases in Baicheng, Yantai, Shanghai, Guangzhou and Wuxi.
It is understood that this is the third foreign auto parts giant that has been deployed in Wuhan after Westcart and Cummins since April this year.
In the face of China's huge auto parts market, foreign-owned brand component manufacturers have recently begun to accelerate their deployment in China, which undoubtedly brings pressure to the survival and development of China's local parts and components companies.
At the same time, government departments are trying to use policies to regulate and adopt "small" strong "big" strategies to guide local auto parts companies or integrate mergers and acquisitions or listing financing to enhance the overall strength of local parts companies.
In this situation, local parts and components are setting off a "heat wave" for mergers and acquisitions.
Foreign Layout
It is understood that on December 12, 2007 before the Wuhan Base began operations, Delphi Packard's Shanghai A5 plant has been relocated from its original site due to business expansion.
On April 8, the world's largest supplier of casting and exhaust manifolds for passenger cars and light trucks, Canadian Wescast Industrial (China) Co., Ltd., officially opened its business in Wuhan Development Zone, with a total investment of 99 million US dollars. This is the first wholly-owned company in Canada built by Viscart Industries of Canada.
On the same day, Cummins Fuel Systems (Wuhan) Co., Ltd. also opened in Wuhan Economic and Technological Development Zone.
Industry insiders believe that in the face of China’s rapidly growing auto market, international auto parts giants are advancing their strategic concept in a rapid and gradual manner, which is to substantiate existing ones by using subdivided localization methods. Absolute competitive advantage, including providing more technical solutions for parts and components, etc., for different vehicle manufacturers in the context of continuous exploration of vehicle prices. The proposal and implementation of these programs are basically based on their own R&D centers.
In response, Liu Xiaoming, secretary-general of the Henan Automotive Industry Association, said: "Because of the huge space in China's auto parts industry, foreign giants have entered China with their advantages, and now they will even be enthusiastic in the future. In addition, the core of foreign-owned parts giants The advantage is also the weakness of China's auto parts companies. So for local companies, under the pressure of foreign investment, their own market space will be reduced."
It is understood that as of now, foreign auto parts and components have a 3/4 share of the Chinese market, and some core parts have even reached more than 90%.
Integrate "heat wave"
Compared with local parts and components companies, although foreign capital has its own unparalleled advantages, but the face of the same piece of cake, the local parts and components companies are not willing to be "weakened" and still eager to share. However, one premise is that you must be strong enough to have enough right to speak with foreign capital.
However, the current reality is that domestic domestic parts and components industry generally has a small scale, low industrial concentration, low overall technical level, and a serious shortage of investment in the entire industry. Although Luoyang Sanming Industrial Co., Ltd., the supplier of stepless transmission, has relied on technology to break through the technical difficulties of the industry, it is still underpowered due to lack of funds and still has to face the reality that mass production cannot be achieved.
Therefore, only by integrating mergers and acquisitions or listing financing will it be possible to embark on the road to overall improvement.
In January 2008, Zhejiang Hangzhou West Lake Auto Parts Group successfully acquired 100% equity of Hangzhou Hangzhou Friction Material Co., Ltd. On January 23, Brilliance Automotive Group and Shanghai Automotive Transmission Co., Ltd. signed a cooperation agreement in Beijing. The two parties cooperated in the production of manual transmissions for passenger cars and light commercial vehicles. On April 14, 2008, Chengdu Yinhe Power Co., Ltd., a professional supplier of cylinder liners and aluminum pistons, participated in bidding for 70.746% of the shares of the Chaijinshan cylinder liner factory.
At the same time, at the end of 2007, Fengshen Tire Co., Ltd. (hereinafter referred to as Fengshen Co., Ltd.), which is a subsidiary of China Sunhua Chemical (Group) Corporation, has also started a series of integrated mergers and acquisitions operations. On February 29, Fengshen Co., Ltd. finally completed the acquisition of the entire equity interest of Sanhe LiZhong Power Co., Ltd. with 81,791,800 yuan. Since then, after acquiring 300,000 sets of radial tire production lines, on April 7th, another 3821.865 million yuan was acquired for the group's remaining 500,000 production lines and related supporting facilities.
"In the long run, through these mergers and acquisitions integration, will remove the barriers to the rapid development of Fengshen shares in the future, improve the ability to resist risks in the market competition." Fengshen shares board secretary Han Faqiang said.
Marginalization
“Partners are considering a large-scale benefit, but most local companies are still unable to achieve mass production in the key core component products. If mass production does not increase, the single-piece cost will increase, and the result will be Profits are reduced or even have no profits, so that companies can't keep up with the follow-up research and development, so they must rely on mass production to ensure the profits of the enterprises.Furthermore, if the mass production cannot be achieved, foreign-brand car manufacturers will not dare to use this kind of technology. Product," said Liu Xiaoming.
Therefore, it is very difficult for some companies without brand and technological advantages to survive. In addition, for the current status of China's parts and components industry, Liu Xiaoming also believes: “Our local companies still have a problem, that is, enterprises are more dispersed, it is difficult to form a joint force on scale, and the advantages of forming a group cannot be achieved. This requires the establishment of a certain industrial cluster. ."
In response, the Henan Provincial Government issued the “Automobile and Parts Industrial Planning of Henan Province†at the end of 2007, requesting to increase the level of local vehicle support in the province, gradually form industrial clusters, and expand Zhengzhou, Luoyang, Jiaozuo, Xinxiang, Nanyang, Anyang, Xuchang, Hebi and Other eight auto parts industry clusters.
However, even so, the relevant professionals are still worried about the future of the local parts and components companies. "With the large-scale entry of foreign-funded enterprises, the survival space of China's auto parts companies is getting smaller and smaller. Because many of China's auto products are imported. The products, followed by foreign-funded spare parts suppliers, are supporting them, and as a result, China’s auto parts companies are being squeezed out of the joint venture brand vehicle support system and can only seek development in the low-end and social markets. It is increasingly marginalized."
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