Auto Parts Industry Supply and Demand, Reasons for Profit Changes and Development Drivers, Market Size

1. Industry characteristics

The auto parts industry has a close relationship with the vehicle manufacturing industry, and its industry boom degree is basically consistent with the automobile industry, the vehicle industry is closely related to the development cycle of the national economy, and is highly sensitive to the economic cycle, so the auto parts industry is affected by the downstream vehicle industry and the national economic cycle fluctuations and has a certain periodicity. When the macro economy is in the growth stage, the consumer level increases, the automobile production and sales increase, and the auto parts industry production and sales increase; On the contrary, with the macroeconomic downturn, automobile consumption has been inhibited, which in turn affects the production and sales of the auto parts industry.

The auto parts industry is an important part of the automobile industry and an important basis for the development of the automobile industry. Auto parts manufacturing enterprises are generally established around vehicle manufacturers, so they can form large-scale industrial bases. At present, China has gradually formed six industrial clusters - Yangtze River Delta industrial cluster, Southwest industrial cluster, Pearl River Delta industrial cluster, Northeast industrial cluster, central industrial cluster, Bohai Rim industrial cluster. The characteristics of industrial scale and cluster are becoming increasingly prominent. Therefore, the auto parts industry has regional characteristics.

There is no obvious seasonality in the auto parts industry. However, the production and sales of the auto parts industry are greatly affected by the production and sales of the downstream vehicle industry. Domestic and foreign Oems usually increase production plans in the fourth quarter of each year to cope with the demand of the Spring Festival or Christmas holiday car sales market, resulting in higher production of auto parts companies in the fourth quarter compared with other quarters.

2. Market supply and demand conditions and reasons for changes

In terms of market demand, with the international division of labor of the automobile industry chain, China's auto parts industry has gradually become an important production base of the international auto parts industry, and the domestic vehicle supporting demand and foreign vehicle supporting demand together constitute the market demand of China's auto parts industry.

Affected by a variety of factors, the global automotive industry experienced negative growth in 2018. China has introduced relevant policies to support the development of the automobile industry, and the automobile industry as a whole has gradually recovered. From the data of car ownership and residents' disposable income, China's auto market and auto parts market still has a large space for development.

In terms of market supply, China's auto parts suppliers have a considerable scale of parts exports every year on the basis of basically meeting the domestic vehicle supporting and after-sales market demand. With the promotion of product upgrading and technological innovation, the role of China's auto parts industry in the global division of labor has become more and more important, and its share in the global market will also be improved.

3. Industry profit level and reasons for change

The change trend of the profit level of the auto parts industry is mainly affected by the dominant position of the vehicle manufacturers in the industrial chain, the price changes of the downstream vehicle market, the price fluctuations of upstream raw materials and the management level of parts and parts enterprises. Overall, the OEM is in a leading position in the industrial chain, and has a strong ability to transfer costs to upstream supporting manufacturers, which determines the profitability of upstream supporting parts enterprises to a large extent.

The initial profit margin of the new car is large, and the supporting parts can also reach a higher profit level. With the continuous introduction of new models, the replacement effect of the original models is gradually enhanced, thus forcing the price of the original models to fall, and the price of supporting parts will float accordingly, making the profit space of auto parts manufacturers be squeezed by stages. The auto parts industry lacks the ability to control the price of upstream raw materials, and the fluctuation of raw material prices also puts forward a certain degree of test on the cost control and operational risk control ability of spare parts production enterprises.

As the concept of lean production is widely adopted by vehicle manufacturers, vehicle manufacturers tend to adopt zero-inventory procurement management strategy to reduce inventory occupation of funds, and require supporting parts enterprises to supply in time, thus making supporting parts enterprises face greater pressure on production management and fund operation, thus affecting the efficiency of fund use and profit level