Turbochargers: Makers gear up for market recovery

	Ningbo Motor offers the GT2052S turbocharger for use in Ford models released 2001 onward.

To take advantage of the anticipated upswing, however, makers have to overcome several challenges. For one, they would have to face additional competition from OE suppliers planning to enter or expand their foothold in the aftermarket. Courtesy of their experience working with foreign carmakers, enterprises in the latter group benefit from access to advanced technologies. Some even have global brands in their selection, having acquired distressed overseas-based companies.

Anti-dumping measures and other trade barriers are another tough challenge. Suppliers of passenger car and light truck tires, for instance, have to contend with the US' raised tariffs for three years.

Aiming for greater competitiveness amid these issues, makers of aftermarket parts are increasing allocations for product development and related tasks. In the past 12 months, a number raised investment to amount to 20 percent of annual sales. This is in contrast to 2008, when spending for such activities was equivalent to less than 1 percent of revenue, according to a survey of the National Information Center.

To enhance their aftersales service, a few suppliers have established branches in key overseas markets. Ningbo Dongmai International Trade Co. Ltd, for example, has set up an office in Canada to cater to local and nearby clients. The company exports engine parts primarily to North America and the EU.

Additionally, a number of makers are boosting their low-cost advantage, which has been critical in keeping business relatively insulated from the economic slowdown. As consumers kept a tight grasp on spending, aftermarket retailers turned to China for less-expensive products, helping certain suppliers achieve growth during the difficult period.

At Comarch Industrial Co. Ltd, exports of brake pads and shoes, automotive filters and other aftermarket parts rose about 80 percent during the first half of 2009. Zhejiang Materials Industry International Co. Ltd reported an increase of 70 percent in its automotive lighting shipments after experiencing a decline of nearly 50 percent in the latter half of 2008.

Cost control will be an important function in coming months, with price competition intensifying due to new entrants. Some suppliers are even projecting a drop of more than 15 percent.

To ease pressure on margins, companies are trying to reduce their break-even points by aiming for lower defect ratios. Operating efficiency is also being enhanced through investment in advanced machinery such as automated testing equipment, and automatic or semiautomatic assembly lines.

A number are targeting greater economies of scale via increased sales to the domestic market and emerging economies in South America, Africa and the Middle East. The EU, Japan and the US, however, are expected to remain key markets.

Supplier landscape
India: Suppliers cut costs, diversify

Mainland China's aftermarket parts industry consists of more than 5,000 manufacturers. It is highly fragmented, comprising a large number of factories operating on a small scale. Annual revenue at such companies often does not exceed $1 million.

The sector includes privately owned companies, state-owned enterprises and those backed by financing from Hong Kong, Taiwan or farther overseas. Most suppliers are located in Shanghai and the provinces of Guangdong, Jiangsu, Zhejiang and Shandong.

Automotive filters, lighting, brake pads and shoes, and turbochargers are among the mainland's strongest exports to the aftermarket. North America, the EU and the Asia-Pacific region are the primary destinations.

For overseas shipments, makers typically require a 30 percent deposit. The balance is payable via TT or L/C upon delivery.

	The TP-VN-FH12001 model from Zhejiang Materials is a truck headlight that complies with E-Mark requirements.

After being hit hard by the global financial crisis, India's automotive components industry is taking a cautious stance on exports for the coming months. Many are seizing this chance to boost competitiveness in preparation for greater uptake once economic recovery becomes firmer and widespread.

In line with this, a number of companies are streamlining operations to ease pressure on margins and prices. Several have also diversified their operations to provide a wider selection or serve more markets, and thereby achieve better economies of scale.

The Samvardhana Motherson Group, for instance, acquired UK-based Visiocorp, one of the world's largest manufacturers of automotive rearview mirrors. Finalized in March this year, the purchase was done via the special purpose vehicle Samvardhana Motherson Visiocorp Solutions Ltd.

The group has set up factories in the states of Gujarat, Tamil Nadu and Maharashtra. In Uttar Pradesh, it is establishing a new 13,000sqm plant for the production of wire harnesses.

Minda Corp. Ltd, which manufactures automotive security systems and exports primarily to the US and the EU, is strengthening domestic presence. In the months ahead, it is planning to boost exports to the Philippines, Thailand, Indonesia and Vietnam. The company has factories in the latter two areas, where CKD units are supplied and assembled.

To cut costs, Minda has made its production lines more flexible by retraining employees to be able to handle various aspects of production.

Amtek Auto Ltd, a supplier of machined parts, castings and forgings, has reduced shifts under efforts to keep expenses down. Inventory is also being kept at low levels.

Masu International Ltd, one of the few companies that saw demand increase 15 percent in the past 12 months, is hiring additional manpower. Guarding against currency risk, the company enters into six-month forward contracts, which allow it to maintain prices for the same period. If there is any fluctuation, up to 5 percent of unit cost is absorbed.

About 80 percent of the Masu's machined and forged components go to the aftermarket and the rest are for OE applications. Core products include ball joints and stabilizer links.