The Chinese machine parts business has consistently performed and full-grown over the past few years. However, currently it’s going to up against some powerful times due to will increase in wages, native currency and costs of raw-materials.
The Times Bygone
Last year in 2007, the market growth of the China experienced record high growth in terms of each production and consumption of cars. As people’s incomes rose therefore did consumption. The year 2007 witnessed a production of 8.88 million units and consumption of 8.79 million units.
In terms of exports China registered US$ 2.09 billion price of trade. A year before that in 2006, the sales revenue of the Chinese component makers reached US$ 58.30 billion. What is even a lot of intriguing is that the fact that the Chinese automobile elements production is projected to achieve US$ 115.6 billion in 2010.
A lot of this growth is attributed to roughly 1,000 automobile elements orientated industrial throughout the state, which regarding 10 of those consist prime regional development zones and clusters.
The Present Scenario
The present year is being seen as a year of correction year. According to the National Statistics Bureau, China, the growth rate witnessed during the first two months of 2007 was 90%. However, over the same period this year, it’s just been 37% a big difference of 53%. Undoubtedly the growth rate has suffered.
The costs of raw materials such as oil and aluminium have risen, which in turn seem to have affected the cost of production. The manufacturers of automotive wheels and tires are worst hit as a consequence. On similar lines producers of moulded plastic parts and automotive accessories for cars have also taken a beating.
Why Chinese Auto Parts Stocks Could Be Valuable
In early February, I wrote about an Auto Spare Parts from China manufacturer in this column that’s planning a major global expansion. The company recently announced its first sales order in the North American market.
Based in Jinzhou City, Liaoning, China, Wonder Auto Technology, Inc. (NASDAQ/WATG) operates through a number of subsidiaries that design and manufacture automotive electrical parts and suspension components. In 2006, the company ranked second in sales of automotive alternators and starters in the China market.
Wonder Auto Technology currently sells five different series and over 150 models of alternators, 70 models of starters and various suspension-related parts, supplying a number of auto makers, engine producers and auto parts suppliers in China and abroad. Some of the company’s customers include Beijing Hyundai Motor Company, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., Harbin Dongan Automotive Engine Manufacturing Co., Ltd., and Tianjin FAW Xiali Automotive Co., Ltd.
All of the units will be delivered directly to the customer’s facility in North America and the total value of the contracts is expected to be over thirteen and a half million dollars. Now, this is a small order by any measure, but I think it’s the beginning of a major offensive by this company to penetrate the domestic auto parts business.
The great advantage that Chinese manufacturers have is their extremely low labour costs. The auto parts business is already extremely competitive in the domestic market and now there’s a new entrant that offers enormous economies of scale.