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Reasons for the change of profit level in auto parts industry
(1) Vehicle market competition
With the increasing market competition in the automobile industry, the cycle of vehicle manufacturers' innovation is constantly shortened. The average selling price of new models is higher at the initial stage of marketing, and the profit level of corresponding auto parts industry is also higher. However, with the new models coming into market for a long time and alternative models coming into the market, price reduction is an inevitable rule in the automotive industry. In order to ensure its profit level, the vehicle manufacturer will transfer the price reduction pressure to the first level supplier of the corresponding supporting assembly system, which requires a certain proportion of the annual price reduction of supporting products. At the same time, the first level supplier will transfer the price reduction pressure to the second level supplier, thus affecting the overall profit level of the auto parts industry. The excellent enterprises in the second tier suppliers, due to their strong development ability, can keep up with the pace of vehicle manufacturers, and their profit level is relatively less affected.
(2) Fluctuation of raw material price and change of labor cost
The main raw materials for the production of auto parts are petrochemical products, steel and other metal materials, including plastic particles such as POM, PA, PBT and PP. The fluctuation of raw material price has a great influence on the production cost of auto parts enterprises, thus affecting the overall profit level of the industry.
In addition, the rising labor cost will affect the industry's profit level. However, as the proportion of labor cost in the industry is generally low, the rise of labor cost will not have a significant adverse impact on the industry's profit level. Enterprises can reduce the adverse impact of labor cost rise by improving the automation level of equipment.
(3) Brand and product technology content
The product design ability, mold development ability and production ability of auto parts enterprises determine the degree of their participation in the R & D and production activities of first-class suppliers and even vehicle manufacturers. Enterprises with strong product design ability, mold development ability and production ability can deeply participate in the production process of primary suppliers and vehicle manufacturers, so as to obtain higher profit level.
With the increasing market competition in the automobile industry, the cycle of vehicle manufacturers' innovation is constantly shortened. The average selling price of new models is higher at the initial stage of marketing, and the profit level of corresponding auto parts industry is also higher. However, with the new models coming into market for a long time and alternative models coming into the market, price reduction is an inevitable rule in the automotive industry. In order to ensure its profit level, the vehicle manufacturer will transfer the price reduction pressure to the first level supplier of the corresponding supporting assembly system, which requires a certain proportion of the annual price reduction of supporting products. At the same time, the first level supplier will transfer the price reduction pressure to the second level supplier, thus affecting the overall profit level of the auto parts industry. The excellent enterprises in the second tier suppliers, due to their strong development ability, can keep up with the pace of vehicle manufacturers, and their profit level is relatively less affected.
(2) Fluctuation of raw material price and change of labor cost
The main raw materials for the production of auto parts are petrochemical products, steel and other metal materials, including plastic particles such as POM, PA, PBT and PP. The fluctuation of raw material price has a great influence on the production cost of auto parts enterprises, thus affecting the overall profit level of the industry.
In addition, the rising labor cost will affect the industry's profit level. However, as the proportion of labor cost in the industry is generally low, the rise of labor cost will not have a significant adverse impact on the industry's profit level. Enterprises can reduce the adverse impact of labor cost rise by improving the automation level of equipment.
(3) Brand and product technology content
The product design ability, mold development ability and production ability of auto parts enterprises determine the degree of their participation in the R & D and production activities of first-class suppliers and even vehicle manufacturers. Enterprises with strong product design ability, mold development ability and production ability can deeply participate in the production process of primary suppliers and vehicle manufacturers, so as to obtain higher profit level.