Spots of Promising Light Shine on Mainland Chinese Auto-Parts Makers

While the Big Three American automakers juggle with their official bailouts, allowing them a few months till March 2009 to improve viability, and when so many reports of declining new car sales in Taiwan, Mexico and the U.S. as well as production cutbacks by Toyota further darken the economic outlook, many suppliers relying on the auto industry neglect to consider that depressed spending power due to the credit crunch actually shines a promising light on the auto parts sector.

A timeless fact remains: slower new car sales inevitably force car owners to keep existing vehicles longer, resulting in rising auto parts purchases to keep cars running properly. Such phenomenon would be especially true for commercial vehicles and in physically-larger nations where cars are driven for longer distances, such as North America, Russia and Europe-for example a Los Angeles resident could easily log 30K miles a year merely commuting to work.

And scattered reports out of China bear out the above trend. Some mainland Chinese auto-parts makers have been surprised to see surging orders from overseas, which have encouragingly enabled many to keep production lines humming even in the fourth quarter of 2008, an off-season traditionally.

The president of an export-oriented auto-mold maker in Qingdao city, in southeastern Shandong Province, for instance, reports of receiving escalating export orders, mainly from the U.S., Russia, France, and Holland, from the second half of 2008, and to fill sizable aftermarket demands in those countries.

The executives of Guangzhou Saibao International Accessories Co., Ltd. are also heartened by the steady influx of orders, including many from new markets, despite the gloomy overall business climate. The company produces various electronic auto parts, including parking sensor, power window, car alarm, central door lock, and car alarm.

While China is one of the biggest nations in area where car purchasing has been rocketing in recent years, the ownership-duration is apparently also increasing due to compromised power of consumption. Accordingly, Chinese auto-parts makers also report increased demands from local garages, which is only part of the good news considering that lowering copper and iron prices enable such suppliers to cut production costs, and hence enjoy better profit margins.