Why Are There No Signs Of Price Cuts For Auto Parts

From the perspective of external objective conditions, the problem arises from the drop in car prices and raw material prices of OEMs. It is understood that in order to ensure their own profits, OEMs require suppliers to reduce prices by 8% to 10% every year. A few days ago, OEMs have issued a double regulation notice to upstream parts companies: parts companies are required to reduce their prices to a specified range within a specified period. If the upstream manufacturers refuse to comply, the OEMs will cancel their supporting qualifications. In addition to the price cuts by OEMs, the price increase of raw materials is also one of the reasons why the price of accessories is difficult to drop. Take seals as an example. In 2003, the price of plastic, its main raw material, rose rapidly, resulting in a 4% to 6% increase in the cost of seals enterprises, and further shrinking of profit margins.

However, the main reason for the difficulty in reducing the price of accessories is from the enterprise itself. As we all know, one of the magic weapons for reducing the cost of the parts industry is to form a mass economic scale. However, the scattered, chaotic and poor Chinese parts and components enterprises are obvious to all, and the fragmented supporting market fetters the parts and components enterprises to become bigger and stronger. Whether it is raw material procurement, product process control, or the sales, circulation and service of finished products, Chinese auto parts enterprises have not yet formed a large-scale cost advantage; coupled with the unreasonable product structure, many parts and components enterprises have serious production capacity A surplus, a large number of assets are idle, and fixed costs increase.

In addition, because new products cannot be developed, or because the development of new products is restricted by capital and technology, Chinese auto parts enterprises cannot form mass production capacity. On the other hand, China's auto parts industry is still a labor-intensive industry. Although China has abundant cheap labor resources, the low management level offsets the advantages of low labor costs in China. At present, the labor productivity of Chinese auto parts companies is only one-eighth of that of Japanese auto parts companies. It can be seen that the high product cost and low productivity are the fundamental reasons for the difficulty in reducing the price of auto parts in China.