Auto Parts? China. Africa? China. Next Question.

Where’s the action? Answer: China. The first piece highlights just where foreign firms are producing; the second highlights China’s strategy in Africa.

Auto Parts

Immune to the global slowdown, Chinese auto parts industry delivers record numbers. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.

While markets all over the world tank, while auto maker flirt with bankruptcy, the Chinese auto parts industry goes full steam ahead. In the first seven months of 2008, China’s auto-parts exports skyrocketed by 34.9% year on year (y/y) to $8.88 billion, says a report released by China’s Customs Bureau.

China exported $ 8.73 billion worth of auto-parts from January to July 2008.
Most of this growth was driven by companies that usually complain the most about Chinese imports. Foreign invested companies and joint ventures exported $4.56 billion of auto-parts, up 31.6% y/y, amounting to 51.4% of the total.

Where are Chinese auto parts most popular? In the U.S., in the EU and Japan. The U.S.A. took parts for $2.69 billion ( 8.8%), Europe imported parts for $1.6 billion ( 39.2%), Japan sourced parts for $1 billion ( 36.8%). These three markets alone accounted for 59.6% of the total value of China’s Jan-Jul auto-parts exports.

This validates the previous predictions made by our company:

1.) The parts market, especially when targeted at after sales, is recession-proof.

2.) Europe takes an ever increasing amount of Chinese parts. Exports to the U.S.A. still grow, but at a more leisurely pace.

3.) The main drivers of this growth are foreign companies, who use China as a low cost production base and sell the product under their own brand name at high margins.

4.) Expect further sales increases due to falling raw material prices and sinking shipping costs. This is especially true in the after sales sector. Auto makers may also buy even more Chinese parts. They aim to off-set their diminishing sales with higher cost savings with parts, sourced in China.

About the Author:
Author Bertel Schmitt is looking back at a 30 year career as a marketing consultant to Volkswagen AG. He is now CEO of Hongkong, Beijing, and Hamburg based Sinamotive, a company specialized in sourcing low cost high quality auto parts in China. The company is backed by U.S. venture capital.

China and Africa

The great game continues. While the West frantically tries to cauterize the bleeding of its financial sector, China moves ahead, even though its yearly growth may slow to 8% because of faltering U.S. consumer demand.

To the consternation of U.S. trade officials, policymakers and private-sector trade groups, trade between Africa and China not only has exploded, but also continues to grow at a pace that eclipses the growth in trade between Africa and the U.S.
“It’s a subject that is attracting a considerable amount of attention among members, but there is no one opinion as to whether it is detrimental to U.S. interests, neutral, or if it’s a good thing,” said Tim McCoy, vice president at the Corporate Council on Africa, a Washington-based trade association that focuses on commercial relations between the United States and Africa.What it underscores, many say, is the need for a different U.S. commercial strategy in Africa.

“If we want to compete with China, we can build railroads, put in power infrastructure and telecommunications infrastructure,” said Shelvin Longmire, a veteran Washington-based international consultant. “We may not like the way they’re doing it, but I see China’s activities delivering substantive capital-intensive projects that are going to benefit (African) countries, versus what the West was doing: extracting resources without putting infrastructure in place.”

“With so many infrastructure projects under way in West Africa, this multipurpose offering gives us a real edge,” Verner Hammeken, Safmarine’s multipurpose-vessel manager in China, said at the launch of the service.Three African countries — Angola, Sudan and the Republic of Congo — are among China’s top 10 oil sources, with additional crude imported from Chad and Equatorial Guinea. But China’s huge appetite for Africa’s commodities goes beyond crude oil. There’s cobalt and other strategic minerals from the Democratic Republic of Congo; timber from Mozambique; copper from Zambia; and iron ore and manganese from South Africa