| 05-03-2008 CHINA'S
auto-supply industry, facing new challenges included mounting costs, is expected
to see dramatic consolidation in the near future, according to the latest industry
study. Despite
impressive growth and profitability over the past few years thanks to the booming
car market, domestic auto-parts suppliers also encountered problems that threaten
profits, said global consulting firm AlixPartners. The
Chinese auto-parts industry, to date, has outperformed even Chinese auto makers
with a compound annual revenue growth rate (CAGR) of almost 31 percent from 2004
to 2007. They
also achieved an average net profit in 2007 of seven percent, versus a net margin
of 4.5 percent for Chinese auto makers, the study found. The
fast-growing light-vehicle market in China is also on track to achieve a CAGR
of 15 percent between now and 2011, on top of an average annual growth of 19 percent
since 2003. But
the yuan's appreciation against the US dollar and other currencies, along with
the reduction in China's value-add-tax rebates for auto-parts exports, not only
contributed to the increasing costs for energy and raw materials but also make
it more expensive for exports, said the report. Such
costs can't be easily passed on to customers because the market is so competitive. Exports
now account for 14 percent of total annual sales for Chinese suppliers, representing
a 35-percent CAGR since 2003. The
impact of the VAT change and the yuan appreciation could increase the cost of
many Chinese auto-parts exports by more than 10 percent this year, said the study. On
the other hand, the industry is also highly fragmented and a growing number of
overseas giants are establishing more wholly-owned subsidiaries in China, blocking
the access for Chinese car makers to acquire advanced technologies through previous
joint ventures and licensing agreements.
Editor:Ida
Zhang from Chinabuses.com
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