Chinese auto suppliers survive hard times, expecting turn-around

Shanghai, August 20 (Gasgoo.com) --The year 2008 is not expected to be a hard year for the Chinese auto suppliers. The stronger RMB, rising production cost and the slower market growth are bringing pressure to the suppliers, yet some of them are seeking multiple ways to offset it.  

"Last year the auto parts business account for 80 percent of our sales revenue, but this year it’ll dwindle to 46.8 percent, with the larger share of the income gained from other industries,” said Mr. Lu Caigen, general manager of Shanghai Yongshun Auto Parts Co, which supplies seat components and hinges to Lomason, Shanghai Lear and Shanghai Yanfeng Johnson Controls Seating Co. (SYJCS).

Lu said that his company is planning to develop railway equipment and spare parts, but would not give up the auto parts business.” We are capable of manufacturing and supplying seat assemblies, and we’re looking for interested customers.” Shanghai Yongshun started its auto parts business in 1995 while keeping its industrial equipment business. Now the company is expanding exports of sheet metal parts and stamping parts to the European and American markets.

"We can’t afford to bet all our chips as this year when the auto market is not that fine,” Lu said. Similar to his ideas, another executive from a domestic shock-absorber manufacturer is also enlarging business other than automotive parts.

Nanyang Xijian Automobile Shock Absorber Co., Ltd is planning to put its newly-developed railway shock absorber into production. Nanyang Xijian occupies 15 percent market share with an annual output of 5 million units. “We’ve gained steady presence in the OEM business in China; now we’re trying to increase the aftermarket and export businesses,” Zhao Jianjun, the general manager said.

The Taiwan-funded Gem-Year Industrial Co Ltd chooses a clear business structure—the standard components which contribute 60 percent to revenue, railway fasteners--30 percent, and auto parts—10 percent. Ms Tsai, a board member of Gem-Year, said the group company will open a new auto parts plant in Guangzhou later this year. “We only produce the high-end vehicle fasteners; there’s still room to improve the auto parts business which still accounts for a small share of the total.”

At most risk are those companies (North American suppliers) that sell to direct suppliers to the automakers, said Kimberly Rodriguez, principal at restructuring firm Grant Thornton LLP. "The fourth quarter is going to be a bit of a bloodbath," Rodriguez said.

What he said is also true of the Chinese auto suppliers.

As some of the experts are lowering their forecast of the year’s market growth below 15 percent from last year’s 22 percent, there’s nobody to disagree that Chinese auto sales are likely to hit or surpass 10 million units in 2008.

Many of the suppliers are telling their employees: as long as we could survive the temporary hard times, we’ll finally have the chances to thrive. They still believe the market will turn around.