Will the auto parts industry reshuffle?


Since the second half of the year, with the automotive market further declining, the days of auto parts companies have become increasingly difficult. In the double attack of upstream raw material prices and downstream automakers' price cuts, domestic parts and components companies are struggling and difficult to parry.
The auto parts industry has not become the soft underbelly of the development of China's auto industry.
China's auto parts production system is relatively backward, and there is a big gap between R&D and manufacturing compared with developed countries. China's auto parts production technology is lagging behind. Its research and development capabilities are as follows: Electronic and integrated R&D capability is not strong, and product replacement is slow; at the parts manufacturing level, the product accuracy is not high and the product cost is too high. These make it difficult for China's auto parts to keep up with the development trend of modularization and integrated production of the world's auto industry.
The problem of the innate structure of the vast majority of parts and components companies in China is that the mechanism is inactive and the organizational effectiveness is low, and the manufacturers are basically in a state of disorderly competition. The underlying reason is that the division of labor is backward, and it is a defect in the enterprise system, market system, and government management system. The local protection and ownership division that the automobile industry has formed over the years has led to a self-contained, self-contained production model. Parts and components companies only provide support for a general assembly company, and the scale does not increase, making it difficult to reduce costs. Because many companies are small in scale, they cannot achieve economies of scale. In addition, Chinese auto parts companies have not yet established large-scale cost advantages for raw material procurement, process control for work in progress, and sales, distribution, and service of finished products. On the irrational product structure, many spare parts companies have a serious excess production capacity, a large number of idle assets, increased fixed costs. The total cost of direct procurement in China's total cost of the entire vehicle is generally higher than 60%, and some manufacturers even reach 80%. Therefore, the pressure of the entire vehicle price reduction will be directly passed on to the parts suppliers, and the entire vehicle price reduction will contribute more than half. Degree comes from the auto parts industry. From two dimensions, we analyze the impact of the pressure of the entire vehicle competition transfer on the parts and components industry.
The overall efficiency of the industry. China's auto parts industry is still a labor-intensive industry. Although China has abundant cheap labor resources, its low management level offsets the low labor cost advantage in China. The gap between the average production efficiency of China's auto parts industry and the international advanced level is wider than that of the entire vehicle industry. In 2001, the average labor productivity was less than 20% of that of the United States, and it was only one-eighth that of Japan's component companies. The pressure of shifting the entire vehicle competition is the fundamental driving force for improving the competitiveness of the parts and components industry, which is conducive to the structural adjustment of the industry and the transformation of the entire vehicle manufacturing industry from an opportunistic market to an efficient market.
Structural adjustment of the industry. The pressure of competition will likely lead to adjustments in the industry structure in three areas: First, more FDI will enter China, and foreign-owned and Chinese-foreign joint ventures will occupy a higher market share, in addition to satisfying the rapid growth of domestic components and parts In addition to market demand, it is still the main force for exporting to foreign OEM markets. Second, the traditional model of internal procurement represented by the three major vehicle groups will gradually be broken. In particular, the joint venture vehicle manufacturers entering China will look for the best suppliers nationwide. The independence of suppliers will increase, and SMEs that rely mainly on vehicle groups will face increasing pressure. From a regional point of view, the advantages of the joint venture manufacturers in the East China and South China regions gradually emerged. Third, becoming an integrator and component specialist is the two major development directions for domestic component suppliers. This will lead to a gradual and clear supply hierarchy for Chinese component suppliers. There will be neither integrated capability nor a professional company. Will face difficulties.
Judging from the trend of industrial restructuring, the auto parts industry will indeed face reshuffle, but this is certainly a gradual process of gradual development. Changes in the relationship between supply and demand will affect the speed of the process at any time. The difficult question now is, what kind of economic measures and management techniques will the government use to motivate the sound development of China's spare parts industry cluster? How can the princely separatist industrial structure and the Chinese-foreign collateral-style matching pattern break through? How will the KD tide after joining the WTO deal with it? It seems that the future of China's parts and components industry depends on the hard work of the company itself and on the government's effective macro guidance.

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