Over 40% of parts suppliers in China have liquidity problems
A survey from Alix Partners, a global business consulting firm, revealed that more than 40% of auto parts suppliers in China are facing severe liquidity problems. Over the next 12 to 18 months, unless there are aggressive measures to keep cash, there will be many component suppliers closed down.
According to "Alix Partners Chinese auto parts supplier outlook for 2009", the profit rate of Chinese parts suppliers exceeds that of vehicle manufacturers in 2007/2008, but it has dropped sharply in the fourth quarter of 2008, with a 9% decline. , close to the US supplier's 14% decline. In the comparison of “average working capital days†in the fourth quarter of 2008, China’s spare parts suppliers were 74 days, and European and American suppliers were only 37 days. In the next 12 to 18 months, if auto parts companies cannot accelerate financing, there may be a large number of mergers and acquisitions.
Alix Partners believes that having a degree of scale and concentration can only gain the support of development profits and the right to dialogue with auto factories and distribution channels. China's parts and components companies have low concentration and retail terminals are scattered; smaller scales restrict component companies to establish networks for sales and service; and for the protection of taxation and employment, the market in each province, city, and region is highly divided.
Alix Partners China's auto parts supplier outlook for 2009 is an annual survey, which was conducted by Alix Partners and senior executives of 40 auto parts companies.