The reduction in global auto production has led to a decrease in demand. How to deal with the impact of domestic parts exports?

Lack of cores, shutdowns, and production cuts are the real dilemmas facing the global auto industry.

On October 18, Volkswagen’s Skoda began to stop production for another two weeks, mainly due to a shortage of chips. For the same reason, many Toyota factories in Japan are still temporarily suspending production; Maserati also announced on the same day that the release time of its Grecale SUV will be postponed from November this year to the spring of 2022… The latest forecast from Boston Consulting Group (BCG) says , the chip shortage will reduce global car production this year by 7 million to 9 million.

The reduction in global auto production has led to a decrease in demand. How to deal with the impact of domestic parts exports? | China Automobile News

« Recently, affected by the reduction of automobile production in Europe, America, Japan and South Korea, overseas auto parts orders have been partially reduced and delayed delivery. In addition, export shipping costs have risen sharply and shipping capacity has been tight, which has put pressure on parts exporters. » As Zhejiang Xiang Shuanglin, chief engineer of Chenxing Automotive Electronics Co., Ltd., told the reporter of China Automotive News that many auto parts export suppliers are concerned about the recent export of parts.

The impact of the reduction in vehicle production

It is understood that about half of domestic auto tires are exported overseas, and their global market share exceeds one-third, but the number of exports has recently declined.

The reduction in global auto production has led to a decrease in demand. How to deal with the impact of domestic parts exports? | China Automobile News

According to data released by the General Administration of Customs, in July 2021, China’s rubber tire exports were 570,000 tons, a decrease of 40,000 tons from the previous month and a year-on-year decrease of 8.8%.

« Our tire export orders have dropped by nearly 8% year-on-year. Due to the increase in shipping costs, profits have also been compressed. At present, we are studying how to deal with it. » Ji Ruijiang, deputy chief engineer of Shandong Xingguang Tire Co., Ltd., told the « China Automobile News » reporter In the interview, he said that the shutdown and production reduction of overseas OEMs have a direct impact on the export of domestic auto parts.

At the same time, many unfavorable factors from the market have also increased the cost of other domestic auto-related parts companies. Wang Liuqi, general manager of Sanyuan Vehicle Purifier Co., Ltd., told reporters that the increase in raw material prices caused the company’s production costs to increase by 20% year-on-year. The price of stainless steel material was 8,200 yuan per ton in the same period last year, and now it has risen to 14,000 yuan per ton; the price of iron plate was 4,200 yuan per ton in the same period last year, and has recently risen to 8,300 yuan per ton; the price of a precious metal required for the production of automobile purifiers It has also tripled year-on-year. Last year, it was 2,000 yuan per gram, and now it has risen to 6,000 yuan per gram. At the same time, sea freight has increased by as much as 10 times, and containers are often not available.

The latest data shows that from January to August this year, the export value of my country’s auto parts products was 316.58 billion yuan, a year-on-year increase of 34.6%.

« The above data contains many factors. » Ling Yuebin, an analyst at Huatai Securities, said in an interview with a reporter from « China Auto News » that for statistical data, firstly, it is necessary to see that the base of auto parts exports affected by the epidemic last year itself Second, not only have the prices of raw materials increased since the beginning of this year, but also export shipping costs and road transportation costs have risen, and these new costs will be calculated in the production cost and export amount. The third is that many foreign OEMs have repeatedly stopped work in stages due to the epidemic and chip shortages this year. Many auto companies have repeatedly revised and superimposed the number of production cuts this year, resulting in a simultaneous reduction in the demand for parts and components. These factors have a considerable impact on the export of domestic parts and components.

The export model of « fighting the number » is gradually drifting away

« Today, the practice of relying on the export volume of low-end and mid-end parts and components as in previous years has gradually become unworkable. Not only are the profits getting lower and lower, but traditional mid- and low-end products are gradually being phased out as technology evolves. « Xiang Shuanglin told reporters a question worthy of consideration for domestic parts export enterprises.

The reduction in global auto production has led to a decrease in demand. How to deal with the impact of domestic parts exports? | China Automobile News

« It should be noted that although the export of domestic auto parts has been in a relatively stable state in recent years, with the transformation of the global auto industry and the rapid technological progress, relying on the low-end route to win by quantity has no future. Meng Xiangcheng, a researcher at the Shandong Institute of Foreign Trade and Economic Cooperation, told a reporter from China Auto News that, from a practical point of view, there are currently various types of domestic auto parts exports. First, in terms of traditional auto parts, including metal structural parts , plastic parts, interiors, glass, tires and other parts; second, in the new energy vehicle parts, not only include power batteries, motor components, power management systems and other parts, but also intelligent network systems, audio-visual entertainment systems, navigation systems, etc.; third, there are obvious regional differences in the export of parts and components. In the category of auto parts with large export value growth, automotive glass is mainly exported to the United States, Japan, Germany, South Korea and other traditional automobile manufacturing countries; automobiles The main export markets for tires are the United States, Mexico, Saudi Arabia, and the United Kingdom; the frame and braking system are mainly exported to the United States, Japan, Mexico, and Germany; the body panels and wheels are mainly exported to the United States, Japan, Mexico, and Thailand. Braking systems, suspension systems and steering systems, electrical lighting devices, etc. are mainly exported to Japan, South Korea, Mexico, Thailand, etc. At present, the large number of export products are still dominated by traditional low-end products, with meager profits and not irreplaceable. In addition, with the rapid development of new technologies such as vehicle electrification, intelligence, networking and autonomous driving, the export market for traditional low-end and medium-end components has been greatly compressed or even replaced.

In addition, regional policy changes overseas are also affecting the export of auto parts. « Recently, the EU released the « European Green Agreement », in which, while proposing the principles of sustainable development and smart transportation, it is also clear that carbon tariffs will be implemented. Once implemented, it will inevitably directly affect the export of auto parts to Europe. » Qiu Changshuo, a member of the Academic Advisory Committee of the Chinese Academy of Environmental Sciences, told the « China Automotive News » reporter that this means that the EU will set up carbon footprint limit regulations for auto parts and vehicles exported to the EU. First, by 2024, enter Europe Auto parts companies such as power batteries in the market must provide a carbon footprint statement; second, by 2025, every car and related auto parts exported to the EU will be required to calculate and publish its life cycle carbon dioxide emissions. In order to meet the above requirements, the original export volume and cost advantages of my country’s auto parts enterprises will be significantly weakened or even no longer exist.

How to « break out » in the face of adversity?

Unfavorable factors such as new technologies, new changes, and new difficulties are all testing the export capabilities of domestic parts and components enterprises.

« Increasing technological innovation and research and development, and improving the pricing of new products with leading technologies have gradually become the way for auto parts companies to ‘break out’. In the past, a traditional parts product could only be sold at a maximum of 50 yuan, but a product with similar functions Or the starting price of the same innovative product is 100 yuan, which is the value of innovation. » Xu Dongming, the head of research and development of Jianli Metal Co., Ltd., told reporters that the export of automobile safety system-related products requires extremely high stability, and for new products The R&D and verification cycle requirements are also more stringent, all of which need to accelerate technological innovation, otherwise the export products will not be accepted by the other party.

« In recent years, the technological iteration of electronic components related to new energy vehicles has been accelerating, and component companies can no longer produce ’10-year consistent’ export products as in the past, which forces component companies to adapt to overseas user companies and overseas markets. Changes demand constant innovation.” Xiang Shuanglin said that continuous innovation and iteration, optimizing the design of auto parts, and improving product quality and consistency are the “rules” that domestic parts companies should follow in exporting.

The reduction in global auto production has led to a decrease in demand. How to deal with the impact of domestic parts exports? 

« Comparatively speaking, in the past, low labor costs and the price competitiveness of auto parts products have always been the traditional advantages of my country’s auto parts exports, but in recent years, under the background of new industrial changes, these advantages are weakening, and technology Innovation is becoming a new advantage for auto parts exporters to adapt to the competition in the international market. » Chang Dequan, consultant of the Foreign Trade Branch of the Northern Machinery Industry Research Association, said in an interview with a reporter from China Auto News that if domestic parts companies want to break into technology In the export market with increasingly high requirements and faster product changes, there are still some problems that need to be adapted. First, the technological innovation capability and R&D investment are insufficient. The annual investment in R&D of the world’s leading multinational auto parts companies can usually be It reaches nearly 8% of its revenue, while many domestic auto parts companies cannot even reach 4% of their revenue. Without innovative products with higher technical gold, it is difficult to have strong export competitiveness. The second is the lack of research and development capabilities, which makes the product structure unable to quickly adapt to the changes in the international market demand. Most of the domestic auto parts exports are still low-end products, and the high-end products and high-profit products that face the surge in foreign demand are basically blank; The degree of cooperation with foreign OEMs is not deep, and they cannot participate in the early model research and development of foreign OEMs, so they cannot provide them with core technology products; fourth, the product quality consistency of some domestic auto parts companies is not enough. It needs to be improved urgently; Fifth, due to the gap in management level and insufficient cost control ability, it also causes the problem of low profit margin.

Working together to open up new channels for going to sea

The reduction in global auto production has led to a decrease in demand. How to deal with the impact of domestic parts exports? | China Automobile News

Nowadays, with the increasingly diversified, personalized and high-end demand of the international automobile market, the development cycle of new models is gradually shortened, and new requirements are also put forward for the export of auto parts. « Integrating into the global industrial chain with one’s own strength will not only bring greater gains in product exports, but also enterprises will achieve greater development. » Meng Xiangcheng said that with the acceleration of the development cycle of new models and changes in the development model, related vehicles The systematization, integrity and rapid response of parts research and development put forward higher requirements, so the requirements for the synchronous development and innovation ability of parts export enterprises are higher. He proposed that, in this regard, domestic auto parts companies should firstly establish a product quality certification system that meets international standards and integrate with the international market; Strive to achieve rapid response; third, in the industry, we must increase the industrial concentration, form a group of large parts and components enterprise groups with international competitiveness, change the current situation of small, scattered, chaotic and disorderly competition, and enhance the overall competitiveness of the industry The fourth is to integrate into the global supply chain, which will help domestic auto parts companies to improve their development capabilities and establish a sales network system and a service system that is in line with international and domestic market needs.

Today, the domestic policy level is more favorable for the export of auto parts, and at the same time, the international conventions that China has participated in will also provide favorable conditions for the export of auto parts. Chang Dequan said that the Regional Comprehensive Economic Partnership (RCEP) signed by China will significantly reduce tariffs, and once it is formally implemented, it will bring more opportunities for auto parts exports. Moreover, China has recently formally applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). If successful, it will bring a more convenient channel for the export of auto parts.

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