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Car-parts makers feel pinch of slower sales
By Shao Shijie |
September 19, 2011, Monday
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SLOWER growth in China's auto sales has spilled over to the auto-parts industry.
In the first half of the year, the 52 listed car-components manufacturers reported aggregate sales of 130.5 billion yuan (US$ 20 billion), an increase of 17 percent from the same period last year, according to China Merchants Securities.
That is a slowdown from the 56 percent sales growth recorded in the first half of 2010.
Combined net profit of the auto-parts makers grew 9.8 percent to 9.9 billion yuan, a pace also significantly down from 61 percent in the first half of 2010.
Demand for components has slackened as auto sales slowed to 3.2 percent growth in the first seven months of this year from a 30 percent pace in 2010. Fewer people are buying cars since the expiry of tax incentives, the tightening monetary policy and the implementation of curbs on vehicle registrations in some big cities.
"The slide in revenue and profits accelerated in the second quarter," said Wang Liusheng, an analyst from China Merchants. "Parts makers are also seeing profit margins whittled by higher costs of raw materials and labor."
Car components makers supplying parts for commercial vehicles and heavy-duty trucks suffered the most in the first half.
Anhui Quanchai Engine Co said net profit for the first-half slumped 33 percent year-on-year to 41.6 million yuan after sales of diesel engines declined 13 percent. The company is a major engine supplier to Beiqi Foton, China's largest light commercial vehicle producer.
Net profit of Shanghai-listed Fuyao Glass Industry Group Co, a major glassmaker, declined 8.7 percent to 799 million yuan in the first six months.
Some companies have outperformed the market, however, including passenger car manufacturer SAIC Motor Co, Weifu High-Technology Group Co, which manufactures diesel and fuel oil injection systems, Weichai Power Co and tier producer Qingdao Doublestar Co.
China's commercial vehicle sales remained sluggish in July and August. "I don't expect any positive growth in the third quarter, and related listed companies are facing high pressures on profitability," said Wang Yusheng, an analyst from BOC International.
Some analyst suggest auto parts makers need to focus more on the vehicle servicing and maintenance market.
"The growth of China's after-sale services provides huge opportunities for parts makers and dealers," said Li Lihua, deputy president of consulting firm AlixPartners Shanghai Office." The after-sale market is highly profitable."
Her company estimates that 145 million cars will be on the road by 2015, more than double the number last year. That could generate annual sales growth of 30 percent for companies supplying the spare parts and services markets, it said.
In the first half of the year, the 52 listed car-components manufacturers reported aggregate sales of 130.5 billion yuan (US$ 20 billion), an increase of 17 percent from the same period last year, according to China Merchants Securities.
That is a slowdown from the 56 percent sales growth recorded in the first half of 2010.
Combined net profit of the auto-parts makers grew 9.8 percent to 9.9 billion yuan, a pace also significantly down from 61 percent in the first half of 2010.
Demand for components has slackened as auto sales slowed to 3.2 percent growth in the first seven months of this year from a 30 percent pace in 2010. Fewer people are buying cars since the expiry of tax incentives, the tightening monetary policy and the implementation of curbs on vehicle registrations in some big cities.
"The slide in revenue and profits accelerated in the second quarter," said Wang Liusheng, an analyst from China Merchants. "Parts makers are also seeing profit margins whittled by higher costs of raw materials and labor."
Car components makers supplying parts for commercial vehicles and heavy-duty trucks suffered the most in the first half.
Anhui Quanchai Engine Co said net profit for the first-half slumped 33 percent year-on-year to 41.6 million yuan after sales of diesel engines declined 13 percent. The company is a major engine supplier to Beiqi Foton, China's largest light commercial vehicle producer.
Net profit of Shanghai-listed Fuyao Glass Industry Group Co, a major glassmaker, declined 8.7 percent to 799 million yuan in the first six months.
Some companies have outperformed the market, however, including passenger car manufacturer SAIC Motor Co, Weifu High-Technology Group Co, which manufactures diesel and fuel oil injection systems, Weichai Power Co and tier producer Qingdao Doublestar Co.
China's commercial vehicle sales remained sluggish in July and August. "I don't expect any positive growth in the third quarter, and related listed companies are facing high pressures on profitability," said Wang Yusheng, an analyst from BOC International.
Some analyst suggest auto parts makers need to focus more on the vehicle servicing and maintenance market.
"The growth of China's after-sale services provides huge opportunities for parts makers and dealers," said Li Lihua, deputy president of consulting firm AlixPartners Shanghai Office." The after-sale market is highly profitable."
Her company estimates that 145 million cars will be on the road by 2015, more than double the number last year. That could generate annual sales growth of 30 percent for companies supplying the spare parts and services markets, it said.
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