China`s Auto-parts Industry Rebounds at Home Despite Lower Exports

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December 18, 2009

China`s Auto-parts Industry Rebounds at Home Despite Lower Exports

In the first seven months this year, the share prices of 17 listed auto-parts companies in China, out of 23, doubled, underscoring the business upturn driven by brisk sale of cars in the domestic market.

China`s auto parts sector owes its upbeat performance to continuing steady car sales over the same seven months, when auto sales jumped 17.7% year-on-year to over 6 million vehicles, a record high. Other reports say that Buicks have been posting monthly sales increases since Jan., despite GM`s poor performance stateside. Robust car sales have translated into substantial orders for listed auto-parts suppliers in China, most of which are OEM (original equipment manufacturer) for medium- and high-end passenger cars. The influx of demand has boosted the overall capacity utilization rate of the auto-parts industry to 80%, a major improvement from the level at the beginning of the year.

Moreover, auto-parts suppliers have been benefiting from stable prices of materials and ready-to-drive cars, hence helping to augment profit margins. The statistics at the National Development and Reform Commission (NDRC) show that car prices inched up 0.37% year-on-year in the first half, while domestic material prices remained low.

Meanwhile, aluminum prices in China ranged from 11,000 to 14,000 yuan per metric ton in the first half, while prices of glass and tires tumbled, due to declining prices of some chemicals.

In contrast to the brisk sales of cars and busy activities at auto parts makers in China, exports of China-made auto parts plunged 36.7% year-on-year to US$3.08 billion in the first four months of 2009, according to customs statistics, including US$2.44 billion in auto-parts export via typical trade channels, down 35.9%, and US$550 million in processing trade, down 44.7%. Such downturns are likely due to the barely recovering global economy, with sluggish consumption in all the major markets. The U.S., among others, has been funding the "Cash for Clunkers" program to drive up new car sales by subsidizing purchases.

During the first four months, shipment of China-made auto parts to Japan plummeted 53.1% to US$260 million, the steepest decline among the major overseas outlets, followed by 37.1% decline to US$550 million in shipment to the European Union and 33.7% decline to US$1 billion for the U.S. market. One reason for such drop in exports to Japan may be that Toyota Motor, the world`s biggest carmaker by sales, suffered a Y77.8 billion (US$818 million) net loss in its fiscal first quarter as it struggled to adjust to the worst car industry downturn in decades.

Exports by foreign-invested and private auto parts makers in China suffered 37.3% and 26.6% of declines year-on-year, respectively, to US$1.57 billion and US$1.01 billion, accounting for 83.8% of the total export, in the first four months.

The auto-parts exports from Zhejiang Province dropped 28.3% year-on-year to US$650 million, the largest among all Chinese provinces, followed by US$420 million out of Jiangsu, down 46.9%, and US$410 million out of Shandong, down 11.6%.

China`s sliding auto-parts exports, though, appear to have bottomed out, as the export figure reached US$880 million in April, still a 35.3% year-on-year drop but a 9.8% increase over March.

(by CENS)

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China`s Auto-parts Industry Rebounds at Home Despite Lower Exports