Over 50% of Parts Suppliers Will Profit Below 5% in 2009

The survey results published by the consulting company AlixPartners on April 16 show that by 2009, more than 50% of the suppliers expect the net profit margin to be less than 5%; and in the 2008 survey, none of the respondents expected that between 2008 and 2010. Net profit will be less than 5%.

AlixPartners collected data through in-depth interviews with senior executives of 40 state-owned, private and multinational auto parts companies in China. AlixPartners' similar survey a year ago showed that 55% of respondents stated that they expected to have more than 20% growth in operating income between 2008 and 2010, and that the profit margin was healthy, which is in stark contrast to the current results. More than 20% of the suppliers in this year's survey stated that they had a net loss in 2008.

The total sales revenue of the Chinese auto parts industry in 2008 amounted to RMB 828 billion, of which 23% came from exports. One-quarter of total export revenue comes from the United States, but the related amount in 2008 decreased by 10% year-on-year. 60% of parts and components companies respondents believe that “the decline in export demand” is the most important challenge in the future.

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