On February 11, 2010, data released by the National Bureau of Statistics showed that the national industrial product ex-factory price (PPI) rose 4.3% year-on-year in January 2010, an increase of 2.6 percentage points from the previous month. In the national PPI in January, the ex-factory price of means of production rose by 5.5% year-on-year, of which mining industry rose by 31.4%, raw material industry rose by 8.6%, and processing industry rose by 0.8%. Purchase prices of raw materials, fuels, and power rose 8.0% year-on-year. It goes without saying that this has created a big problem for China's spare parts manufacturers. How to achieve development in the new round of cost crisis is an urgent issue for every auto parts and components company to start the Year of the Tiger. Does price rise or rise? The most immediate problem caused by the rise in raw materials is the increase in product production costs, and whether the product itself is subject to price increases, but it is not the ability of the company to decide on its own. Since the fourth quarter of 2009, the price of natural rubber has once approached historical highs, which has brought great pressure on tire companies. It is also their opinion that the entire parts and components industry is the first to throw up prices. Shen Jinrong, chairman of Hangzhou Zhongce Rubber Co., Ltd., a leading price riser, stated that on January 19th, the company’s four-brand tires, Chaoyang and Luck, had an ex-factory price increase of 5%. Another tire giant tire in China has also raised its price by 5%. There is news that prices will increase by 6% in March. Indeed, natural rubber rose about 960 US dollars per ton, an increase of 45%; butadiene rubber rose 39% per ton; SBR increased by 37% per ton. In addition to the continuous rising trend of major raw materials, transportation costs are also rising. According to the current average level, the cost of ordinary car tires will increase by approximately 15%, and the cost of trucks and engineering tires will increase by 25% to 30%. Tire enterprises suffer, and Gu Sili, general manager of Cooper Tire China, believes: “The most troubling aspect in the tire industry today is raw material price rises. At the peak of 2009, raw materials reached a level of 3,200 US dollars a barrel, and then fell to 1,600 US dollars. Tire companies have been doubling their raw materials since November 2009, and we are at least adding double-digit cost pressures. In the second quarter of 2010, there will be pressure for price increases, and tire companies are now releasing their winds. To come up with price increases, and the industry has also discussed and discussed, it is generally believed that price increases range from 5% to 8%. If raw materials maintain high prices, tire companies will not survive in the third quarter of 2010.†Michel Rollier, Managing Partner, Michelin Group It also stated that: The market forecast at the beginning of 2010 and the increase in raw material costs made it highly alert. China Bus Network reporter then interviewed some other parts and components companies. A relevant engine company official told reporters that the increase in raw material prices caused pressure on the company, but faced fierce market competition, but it did not dare to. Random price increases, and in the face of gradual decline in vehicle prices, there is a further decline. Zero to accelerate the pace of restructuring With the increase in raw material costs and thinning profits, although the increase in costs is unlikely to affect auto companies, it has become the main force for shifting cost pressures to parts and components companies in the downstream of the industry, and has felt the pressure. In order to further ease the pressure on costs, it is a good idea for parts and components companies to become strong players in the industry, and to speed up industrial restructuring and scale advantages. Xu Changming, director of the information resource development department of the State Information Center, suggested that the merger and reorganization of parts and components companies is more urgent than the entire vehicle. Xu Changming believes that the current merger and reorganization focuses on vehicle companies. The reorganization of parts and components companies is actually more urgent and necessary than the entire vehicle. If there are no large parts and components companies, the costs will not come and the quality will not go. The development of the entire industry will be extremely difficult. According to experts, domestic parts and components companies are small in scale, weak in strength, and have a severe shortage of research and development capabilities. Under this background, if the parts and components industry wants to develop rapidly, it must speed up mergers and reorganizations to form a scale effect. Independent innovation to strengthen services It is understood that the rising cost of raw materials has a significantly lower impact on high-end branded cars than on low-end vehicles. According to the bus network reporter, the impact of rising raw materials on parts and components companies with independent intellectual property rights is also very limited. Nanjing Taiyi is a company that specializes in tire pressure management technology. It has independent intellectual property rights. Its responsible person told reporters that the company's mature customers are looking at the superiority of the product itself, and the impact of rising raw materials is very limited. However, surveys have shown that more than half of China’s parts and components companies do not have patents yet, and even fewer have patents for inventions. Patented parts and components companies account for only 42.8% of all companies, and 19.5% have patents for inventions. In addition, the level of innovation is relatively low. Although we have a lot of patents, they are mainly utility models and designs. Only by providing good services can a company establish a long-term, stable and mutually beneficial relationship with its customers. Therefore, the service is not only a service but also a marketing, and even a part company has launched its own service brand. An engineer from a well-known passenger car brand in China told the Bus.com reporter that they particularly love the Cummins engine and will give priority to recommending to customers. The most important reason is that they have taken a fancy to their after-sales service. The connotation and denotation of the service have undergone constant changes, and now it has been accompanied by the whole process of the product life cycle. With the fierce competition in product prices and the rapidly shrinking profit margins, service becomes the new profit-added space for enterprises in the future.
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