North American car market downturn aggravates competition for auto parts in China
Due to various economic factors in the United States and the slow sales of new vehicles in the North American market, Japanese companies such as Kosaka Manufacturing Co., Ltd. and Toyota Production Co. have announced that they will adjust their production scales and delay their original plans to expand capacity. A year ago, many Japanese auto parts manufacturers were eager to increase their production in the U.S. For instance, Toyota Motor’s supplier planned to build a new plant in Mississippi in 2010 to produce interior trim parts. Similarly, Stanley Electric, a supplier for Honda, intended to boost its headlamp production in Ohio. Recently, Kosaka Factory also closed its line that supplied lighting components for large SUVs in the U.S. In contrast, several Japanese auto parts companies, including Denso, are now shifting their focus to China. As the largest auto parts manufacturer in Japan, Denso announced at the start of the year that it would increase investment in China, aiming to raise its sales in the country to 220 billion yen by the end of fiscal 2010—up from 150 billion yen set a year earlier. Analysis 1. Influenced by the sharp decline in production from major automakers like GM, Ford, and Chrysler, as well as Toyota, Japanese parts suppliers are taking urgent actions to concentrate on high-demand small cars. At the same time, they are repositioning their business strategies. With Japanese car brands expanding aggressively in key Chinese cities, and the long-term stable relationships between Japanese automakers and their suppliers, the supply chain for auto parts is expected to continue growing in China. 2. The domestic auto parts industry relies heavily on three areas: the original equipment (OE) market, the aftermarket, and the export market. Among these, the OE market remains the most critical. However, due to macroeconomic impacts and slower growth in the auto market, many parts companies have not met their targets in the OE sector, especially those supplying their own brands. Additionally, as Japanese suppliers establish themselves in China, local suppliers are losing some of their support contracts. Gasgoo.com frequently receives feedback from suppliers, particularly in the Pearl River Delta region, indicating this trend. 3. Due to currency fluctuations and the downturn in the North American auto market, demand in the export market has also declined. However, markets in Russia, Brazil, and Thailand have shown stronger growth. With more foreign-invested factories opening in China, the share of exports from foreign-owned component suppliers in the overall sales of the industry is increasing. Some consulting agencies predict that by 2015, the proportion of foreign-funded parts suppliers could rise to 40% (currently around 30%), and the export ratio may reach about 20%. 4. Thanks to the continued rise in vehicle ownership, the aftermarket remains one of the few stable areas of demand. Industry forecasts suggest that China's automotive after-sales service market will reach a massive scale of 190 billion yuan by 2010. In the second half of this year, many domestic commercial vehicle support companies have shifted their attention to the aftermarket. Meanwhile, with excess production capacity, foreign capital is entering the after-sales market and forming alliances with foreign chains of service centers to capture premium segments. XUYI BOTU ATTAPULGITE CLAY CO.,LTD , https://www.xuyibotu.com