SMM Network News: in a twinkling of an eye, 2020 is nearing the end of the year, but recalling the bad situation faced by China's auto parts industry when the novel coronavirus epidemic broke out at the beginning of the year, I believe many people in the industry still remember it vividly, for example, the continuous delay in resuming work leads to the failure of normal production and delivery, a sharp decline in performance, frequent wage cuts and layoffs, and so on. However, it is gratifying to note that thanks to the joint efforts of all parties, the situation of China's auto parts industry has gradually improved.
The development environment is improved and the prosperity of the industry is on the rise.
With the epidemic gradually under control, China's car sales are rising month by month, and the momentum of "Golden Nine and Silver Ten" is even stronger. According to the China Automobile Association, car sales in China reached 2.565 million in September, an increase of 17.4% from the previous month and 12.8% from the same period last year. October continued the growth trend, with car sales reaching 2.573 million, up 0.1% from the previous month and 12.5% from the same period last year.
From the perspective of cumulative sales, the annual decline of automobile sales in China is also in a state of continuous narrowing. According to the data, cumulative car sales from January to October reached 19.699 million, down 4.7% from a year earlier, a decrease of 2.2 percentage points compared with January-September. Xu Haidong, deputy chief engineer of the China Automobile Association, said that judging from the current situation, the decline in automobile production and sales in 2020 is expected to be less than 5%.
As the upstream of the whole vehicle, the prosperity of the parts industry is closely related to the downstream vehicle sales, so under the background of the continuous recovery of car sales, the auto parts industry is also accelerating its recovery. This can be seen very intuitively from the three quarterly reports of independent parts enterprises. According to relevant statistics, the total revenue of the 145 companies in the auto parts sector in the third quarter of this year was 199.004 billion yuan, an increase of 13.51% over the same period last year, and the net profit was 10.924 billion yuan, an increase of 35.83% over the same period last year.
Of course, the improvement of the Chinese parts industry has something to do with the recovery of the overseas car market. From the perspective of overseas car markets, although the epidemic has rebounded again and again in some areas, on the whole, the impact of the epidemic is gradually fading, and the prosperity of the car market has also rebounded. Comprehensive national automobile association data, in October this year, the United States, Japan, South Korea, Italy and other new car sales are year-on-year growth, compared with the previous improvement. This means that some Chinese auto parts companies with overseas business layouts will be less affected and their performance can be restored to a certain extent.
More importantly, the gradual recovery of external demand has led to a rise in the performance of the export sector of Chinese auto parts companies. According to the analysis of Citic Securities, in the third quarter, the overseas epidemic gradually slowed down, overseas car sales began to recover, the European car market sales growth rate became positive in July compared with the same period last year, and the North American auto market sales growth rate became positive in August. As a result, automobile production and sales in Europe and North America were already in short supply, and the gap widened further in September, and there was a strong demand for overseas inventory replenishment. At the same time, the overseas supply chain is affected by the epidemic, so it is difficult to reorganize production in the short term, and the recovery of supply capacity is limited, which increases the demand for imported parts. In this case, domestic export-oriented parts enterprises benefit.
In retrospect, with the continuous growth of the international competitiveness of China's auto parts industry, China's local auto parts enterprises have successfully integrated into the world parts procurement system, under the influence of the trend of global allocation of the automobile industry chain, the export volume of China's auto parts industry is also increasing. Relevant data show that China's auto parts exports increased from US $12.959 billion to US $53.03 billion from 2009 to 2019, with an average annual compound growth rate of 16.95%.
Although China's auto parts have been severely hit in the international market and the export volume has dropped significantly after the outbreak of the epidemic, based on the gradual recovery of external demand, China's auto parts export situation has improved significantly in recent months. According to data from the General Administration of Customs, China's auto parts exports have maintained double-digit year-on-year growth of 12.2%, 22.7% and 31.3% respectively for three consecutive months (August-October).
The momentum of development is sufficient, and the follow-up situation is optimistic.
In 2020, in order to boost the automobile consumption market, the state and various localities have issued various automobile consumption stimulus policies, including subsidies for the purchase of new cars, increasing license plate targets, encouraging trade-in for new cars, going to the countryside with new energy vehicles, and so on. Zheshang Securities believes that the relevant policies to stimulate consumption are further spread across the country, which is expected to lead to the early arrival of a "newer trend" of domestic cars.
As far as the fourth quarter of this year is concerned, the HKIFA pointed out that the car market faces many advantages. First of all, the economy continues to grow well. Second, the pace of the launch of new products this year has been extended to the third quarter, and the real amount will not be available until the fourth quarter. In addition, local policies continue to make efforts, and basically expire in December, as the time approaches, the effect of consumers buying cars and grabbing the last bus is more obvious. The agency believes that the growth rate of the car market in the fourth quarter will be close to that in the third quarter.
Chen Shihua, deputy secretary general of the China Automobile Association, said that commercial vehicles will continue to grow in the fourth quarter, driven by policy and investment. In terms of passenger vehicles, the Beijing International Auto Show, which opened in late September, promoted the comprehensive launch of new products by enterprises. Superimposed on the continuation of policies to promote consumption in various places, will have a positive impact on the market.
The growth momentum of the domestic auto market is still strong, which is expected to drive the follow-up development of the auto parts industry. According to the Huaxi Securities Research report, the performance of the three-quarter report plate driven by demand has improved significantly, and the industry has returned to the path of cyclical recovery. Sales growth is expected to reach 10% in the fourth quarter of 2020, corresponding to the annual growth rate of-6% in 2021, and led to a pick-up in upstream parts and downstream dealers.
In addition, Guotai Junan analysts believe that the recovery in external demand is expected to lead to a high increase in auto parts performance, auto parts exports to achieve a three-month acceleration, and the subsequent recovery of low demand from overseas inventories, parts segmentation is likely to continue high growth and exceed market expectations.
China Business Industrial Research Institute pointed out that in recent years, the development speed of the market scale of China's auto parts industry tends to be stable. According to the statistics of the China Association of Automobile Manufacturers, in 2018, China's auto parts manufacturing enterprises achieved sales revenue of 4 trillion yuan, an increase of 7% over the same period last year. Although the industry is slowed down by the epidemic and other factors in 2020, taking into account such factors as national economic growth and the development of new urbanization, China will still be the largest automobile market in the world for a period of time in the future, and there will be some room for growth. The trend of long-term development of China's automobile industry will not change. In this context, the overall development of the parts market tends to be good, and the sales revenue of China's auto parts industry is expected to reach 5 trillion yuan in 2021.
The agency also pointed out that at present, the elements of innovation in the field of auto parts in China have formed a certain accumulation, the innovation environment has gradually improved, the relevant financial and industrial policies have been continuously optimized, the number of invention patents has been steadily increased, and the industrial chain has been continuously improved. therefore, the momentum for long-term improvement will remain unchanged, and China's automobile industry will also change from doing large-scale in the past to strengthening its strength. The proportion of the output value of China's auto parts industry in the total output value of the automobile industry is still lower than the international average level. Therefore, no matter from the growth space of China's automobile industry, or the law of industrial structure adjustment and upgrading of China's auto parts industry, there is still a huge space for China's auto parts industry in the next few years.
Of course, it should be pointed out that the situation of China's auto parts industry is improving, and the future is promising, but challenges remain, such as the risk of a rebound in the epidemic, the rise of emerging countries, and so on. Today, for example, rising labor and production costs in China are prompting many companies to look elsewhere. The rest of Asia has joined the competition with more attractive cost advantages, scrambling to provide cheaper labour and space, and the manufacturing landscape in emerging countries such as Vietnam, India and Thailand has gradually undermined China's position. In this regard, China's auto parts industry still needs to pay enough attention.
