Industry Headlines

China's Auto Suppliers Expected to Increase Revenues, Margins and Acquisitions this Year

April 16, 2010
/ Print / Reprints /
/ Text Size+

DETROIT - Auto suppliers in China, now the most profitable in world, are expected to increase revenues, profit margins and acquisitions-including overseas ones-this year, as well as increase their drive for new technologies, according to a new study by the global business-advisory firm AlixPartners LLP. The study, which included a survey of 50 senior executives from both foreign and domestic players in China’s auto-supply and OEM sectors, also included the prediction that the market share of domestic automakers in China will rise to 36% this year, up from 32% in 2009.

On the back of soaring domestic vehicle sales, in 2009 suppliers in China enjoyed average revenue growth rates of about 23%, to about 1,140 billion yuan, and, according to the AlixPartners survey, revenues in 2010 are expected to grow another 22.6% on average. In all, survey respondents predicted average growth of 20% per annum between now and 2015. Meanwhile, supplier export revenues, which were up only 5% in 2009, are expected to increase more than 10% this year, said the survey.

In terms of profits, operating margins of Chinese suppliers nearly doubled in 2009, to about 9%, versus just 5% for American suppliers in the fourth quarter, and survey respondents said that margins will improve further this year, to about 10%. The study also noted that Chinese supplier margins today are about two percentage points better than that of their OEM counterparts in China, and about that same amount better than their supplier peers globally.

Beyond the highly publicized recent acquisition of Volvo AB by Geely Automobile Holdings Ltd., the study details a dramatically increased level of M&A activity on the part Chinese suppliers as well as OEMS, both domestic and cross-border, such as Wanxiang Group Ltd.’s acquisition of Global Steering Systems LLC of Connecticut and Weichai Power Co. Ltd.’s purchase of French engine producer Moteurs Baudouin SA, both last year. Looking forward, 100% of survey respondents said they expect increasing deal activity in this year and next, and more than 40% said they themselves are actively planning M&A deals in the near future.

“Chinese automakers are getting stronger at home, Chinese suppliers are getting stronger at home and both have money in their pockets and are moving into M&A mode,” says John Hoffecker, a managing director of AlixPartners and co-lead of the firm’s Enterprise Improvement practice. “They will both be a force to be reckoned with going forward.”

The study, the AlixPartners 2010 China Auto Outlook, also found that technology improvement is an important topic for most suppliers in China. About 65% of the executives surveyed said they recognize need for better technology, while 50% said they plan to recruit international experts in help with the technology transfer.

“Technology transfer is like water seeking its own level,” says Hoffecker. “It’s awfully hard to put a ring-fence around it.”

The study also predicted that growing revenues in China will be largely driven by increasing demand in so-called third- and fourth-tier cities, as well as a segment shift towards larger cars in first- and second-tier cities.

Did you enjoy this article? Click here to subscribe to Quality Magazine. 

You must login or register in order to post a comment.




Charles J. Hellier has been active in the technology of nondestructive testing and related quality and inspection fields since 1957. Here he talks with Quality's managing editor, Michelle Bangert, about the importance of training.
More Podcasts

Quality Magazine


2015 January

Check out the January 2015 edition of Quality Magazine for features!

Table Of Contents Subscribe

The Skills Gap

What is the key to solving the so-called skills gap in the quality industry?
View Results Poll Archive

Clear Seas Research

qcast_ClearSeas_logo.gifWith access to over one million professionals and more than 60 industry-specific publications,Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.


facebook_40.png twitter_40px.png  youtube_40px.pnglinkedin_40px.png