Small exporters of auto parts hit by rising yuan and costs

SMALLER exporters of car components have been hit by the rise in the yuan and the surge in raw material costs.

But larger international players in the sector are faring better amid a possible slowdown in exports of auto parts.

"We have lost customers to competitors in India and Vietnam for their cheaper price," said General Manager Yu of Wenzhou OUPU Auto Parts Co Ltd, a producer of electric fuel and water pumps.

The Zhejiang Province-based company lost profits as it concentrated on exports rather than the after-sales market in China, he said yesterday.

Yu said 10 percent of the company's profit margin had been cut by the higher yuan since last year, while steel prices also increased from 5,000 yuan (US$721.14) per ton to 8,000 yuan per ton in the period, worsening its profitability. "We may not make a profit this year," he added.

However, the picture is brighter for NSK China Sales Co Ltd, which supplies parts to Japanese and European auto makers in China.

Ozaki Michio, the company's marketing manager, estimated that revenue from its bearings will double this year, given technological advantages and the fast development of the auto industry.

"China's auto industry will retain 20 percent growth for this year and the business depends on which customer you serve," said Michio.

Michio noted that NSK mainly supplied parts to Japanese and European auto makers, which are expected to grow faster than their United States counterparts. It also helped to shrug off the disadvantage from the higher yuan on the export market.

On the rising cost of raw materials, Michio said large auto parts makers can more easily streamline operations for better cost efficiency compared with smaller companies.

OUPU Auto Parts was among more than 300 auto parts makers to attend the opening day of Auto Components Shanghai 2008 yesterday.

The biennial show with a 12,000-square-meter display area will run until tomorrow, Shanghai International Exhibition Co Ltd said.

The development of China's auto industry has been fast, with vehicle sales estimated to hit 12 million units by 2010.

The total production value is forecast to hit 670 billion yuan this year, and the export value is likely to grow 30 percent, according to industry experts.